The effects of economic regulation and firm performance volatility on CEO compensation packages.

摘要

It is well documented in both popular press and academic journals that CEOs in regulated firms are paid significantly less than CEOs of unregulated firms. Researchers argue this is due to a variety of factors including political constraints, lower CEO quality and a constrained ability to influence profits. A related stream research contains evidence firms operating in a regulated environment tend to experience less volatile financial performance. There is also a substantial body of work on the relationship between firm performance volatility and CEO compensation. However, the literature does not provide a clear answer as to the direction of this relationship.;The motivation for this study is the lack of research into how economic regulation and firm performance volatility are related to CEO compensation. Firm performance volatility is found to be an explanatory factor of CEO compensation. Empirical results also indicate economic regulation is linked to the relationship between these factors. Additional findings support a positive relationship between firm performance volatility and CEO compensation for regulated firms. However, for unregulated films the estimated effect of firm performance volatility is not statistically significant. Considerable differences in the observed effect of firm performance volatility point to a previously undocumented effect of economic regulation on CEO labor markets.