Shocking a CEO: Economic Disintegration and Executive Compensation in Manufacturing and Services Firms

Görg, Holger () and Federico Merchan ()
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Görg, Holger: Kiel Institute for the World Economy
Federico Merchan: Kiel Institute for the World Economy

No 18946, IZA Discussion Papers from IZA Network @ LISER

Abstract: This paper uses the Brexit referendum in 2016 as a quasi-natural experiment to estimate the effect of an exogenous negative shock to globalization on executive compensation for German companies listed in the DAX and MDAX stock indices. We show that it matters whether they work for firms exporting goods or services. The main results indicate that executive compensation in firms operating in sectors that export services was negatively affected, in particular through lower variable compensation. On the contrary, executives of firms that operate in sectors exporting goods were not negatively affected overall, though they experienced a compositional change (from bonuses to equity payments). Sectoral regressions suggest that manufacturing firms redirected successfully exports from the UK to other relevant trade partners, while this was not the case in the service sector.

Keywords: Brexit; executive compensation; disintegration; services (search for similar items in EconPapers)
JEL-codes: E24 F14 F16 G35 J33 (search for similar items in EconPapers)
Date: 2026-09
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