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The impact of firm prestige on executive compensation

Author

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  • Focke, Florens
  • Maug, Ernst
  • Niessen-Ruenzi, Alexandra

Abstract

We show that chief executive officers (CEOs) of prestigious firms earn less. Total compensation is on average 8% lower for firms listed in Fortune’s ranking of America’s most admired companies. We suggest that CEOs are willing to trade off status and career benefits from working for a publicly admired company against additional monetary compensation. Our identification strategy is based on matched sample analyses, difference-in-differences regressions, and a regression discontinuity design. We perform several robustness checks and exclude many alternative explanations, including that firm prestige just proxies for better corporate governance or for increased exposure of the pay-setting process to media attention.

Suggested Citation

  • Focke, Florens & Maug, Ernst & Niessen-Ruenzi, Alexandra, 2017. "The impact of firm prestige on executive compensation," Journal of Financial Economics, Elsevier, vol. 123(2), pages 313-336.
    • Handle: RePEc:eee:jfinec:v:123:y:2017:i:2:p:313-336
    DOI: 10.1016/j.jfineco.2016.09.011
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    More about this item

    Keywords

    CEO compensation; Firm prestige; Social status; Career benefits;
    All these keywords.

    JEL classification:

    • G39 - Financial Economics - - Corporate Finance and Governance - - - Other
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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