Which U.S. Market Interactions Affect CEO Pay? Evidence from UK Companies

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Which U.S. Market Interactions Affect CEO Pay? Evidence from UK Companies

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Title: Which U.S. Market Interactions Affect CEO Pay? Evidence from UK Companies
Author: Gerakos, Joseph; Piotroski, Joseph; Srinivasan, Suraj

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Citation: Gerakos, Joseph, Joseph Piotroski, and Suraj Srinivasan. "Which U.S. Market Interactions Affect CEO Pay? Evidence from UK Companies." Management Science 59, no. 11 (November 2013).
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Abstract: This paper examines how different types of interactions with U.S. markets by non-U.S. firms are associated with higher level of CEO pay, greater emphasis on incentive-based compensation, and smaller pay gap with U.S. firms. Using a sample of CEOs of UK firms and using both broad cross-sectional and narrow event-window tests, we find that capital market relationship in the form of an U.S. exchange listing is related to higher UK CEO pay; however, the effect is similar when UK firms have a listing in any foreign country implying a foreign listing effect not unique to the U.S. Product market relationships measured by the extent of sales in the U.S. by UK companies are associated with higher pay, greater use of U.S.-style pay arrangements, and a reduction in the U.S.-UK pay gap. The product market effect is incremental to the effect of a U.S. exchange listing, the extent of the firm's non-U.S. foreign market interactions, and the characteristics of the executive. The U.S-UK CEO pay gap reduces in UK firms that make U.S. acquisitions. Further, the firm's use of a U.S. compensation consultant increases the sensitivity of UK pay practices to U.S. product market relationships.
Published Version: http://pubsonline.informs.org/doi/abs/10.1287/mnsc.2013.1714
Other Sources: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1738083
Terms of Use: This article is made available under the terms and conditions applicable to Open Access Policy Articles, as set forth at http://nrs.harvard.edu/urn-3:HUL.InstRepos:dash.current.terms-of-use#OAP
Citable link to this page: http://nrs.harvard.edu/urn-3:HUL.InstRepos:29660919
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