CEO Pay-For-Performance Heterogeneity: Examples Using Quantile Regression
Hallock, Kevin F.; Madalozzo, Regina; Reck, Clayton G.
We provide some examples of how quantile regression can be used to investigate heterogeneity in pay–firm size and pay-performance relationships for U.S. CEOs. For example, do conditionally (predicted) high-wage managers have a stronger relationship between pay and performance than conditionally low-wage managers? Our results using data over a decade show, for some standard specifications, there is considerable heterogeneity in the returns to firm performance across the conditional distribution of wages. Quantile regression adds substantially to our understanding of the pay-performance relationship. This heterogeneity is masked when using more standard empirical techniques.
executive compensation; quantile regression; pay and performance
Required Publisher Statement: The final paper is forthcoming in Financial Review, published by Iowa State University.