Societal equality sentiment and executive compensation

Önal, Bünyamin and Petmezas, Dimitris and Xiong, Nan (2022) Societal equality sentiment and executive compensation. Journal of Corporate Finance, 77 . ISSN 0929-1199 (Print) 1872-6313 (Online)

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Using elections that reveal changes in countries' leniency on the left-right political spectrum, we examine whether societal sentiment regarding income inequality affects executive compensation. We find that elections that bring left-leaning (pro-equality) political leaders to power are associated with significantly lower CEO pay and this impact begins in the year of such elections, not before. We further show that a rise in pro-equality sentiment restrains powerful CEOs from extracting rents. However, such sentiment also imposes value-damaging limits on incentives of senior executives in a given firm or industry. Our results are robust to a host of alternative measures and specifications.
Item Type: Article
Uncontrolled Keywords: Efficient contracting; Elections; Executive compensation; Firm value; Managerial power; Societal equality sentiment
Divisions: Sabancı Business School > Accounting and Finance
Sabancı Business School
Depositing User: Bünyamin Önal
Date Deposited: 27 Mar 2023 16:32
Last Modified: 27 Mar 2023 16:32

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