The Dependence of payPerformance Sensitivity on the Size of the Firm

@article{Schaefer1998TheDO,
  title={The Dependence of payPerformance Sensitivity on the Size of the Firm},
  author={S. Schaefer},
  journal={Review of Economics and Statistics},
  year={1998},
  volume={80},
  pages={436-443}
}
  • S. Schaefer
  • Published 1998
  • Economics
  • Review of Economics and Statistics
  • I analyze the relationship between firm size and the extent to which executive compensation depends on the wealth of the firm's shareholders. I use a simple agency model to motivate an econometric model of this relationship. Estimating this model on chief executive officer (CEO) compensation data using nonlinear least squares, I determine that pay-performance sensitivity (as defined by Jensen and Murphy (1990b)) appears to be approximately inversely proportional to the square root of firm size… CONTINUE READING
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