Culture and Ceo Compensation
Abstract: This paper examines CEO compensation in 43 countries from the 1996 to 2009 period and focuses on how national culture affects contracting decisions. Our empirical analysis documents that cultural factors (measuring such societal traits as individualism and uncertainty avoidance) are significant determinants of the relative use of equity-based compensation. These factors are highly significant after controlling for the previously-identified determinants of compensation structure relating to legal environment and firm-specific characteristics. By empirically verifying the strong relation between culture and compensation, we hope to contribute to a more comprehensive understanding of the interaction between informal institutions and corporate decision-making.
