NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Managerial Attributes and Executive Compensation

John R. Graham, Si Li, Jiaping Qiu

NBER Working Paper No. 17368
Issued in August 2011
NBER Program(s):   TWP

We study the role of firm- and manager-specific heterogeneities in executive compensation. We decompose the variation in executive compensation and find that time invariant firm and especially manager fixed effects explain a majority of the variation in executive pay. We then show that in many settings, it is important to include fixed effects to mitigate potential omitted variable bias. Furthermore, we find that compensation fixed effects are significantly correlated with management styles (i.e., manager fixed effects in corporate policies). Finally, the method used in the paper has a number of potential applications in financial economics.

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Document Object Identifier (DOI): 10.3386/w17368

Published: Graham, John R., Si Li, and Jiaping Qiu, 2011, Managerial Attributes and Executive Compensation, Review of Financial Studies 24, 1944-1979.

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