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Are US CEOs Paid More Than UK CEOs? Inferences From Risk-Adjusted Pay

Research output: Contribution to journalJournal article

Published

Journal publication date2011
JournalReview of Financial Studies
Journal number2
Volume24
Number of pages7
Pages402-408
Original languageEnglish

Abstract

We compute and compare risk-adjusted CEO pay in the United States and United Kingdom, where the risk adjustment is based on estimated risk premiums stemming from the equity incentives borne by CEOs. Controlling for firm and industry characteristics, we find that U.S. CEOs have higher pay, but also bear much higher stock and option incentives than U.K. CEOs. Using reasonable estimates of risk premiums, we find that risk-adjusted U.S. CEO pay does not appear to be large compared to that of U.K. CEOs. We also examine differences in pay and equity incentives between a sample of non-U.K. European CEOs and a matched sample of U.S. CEOs, and find that risk-adjusting pay may explain about half of the apparent higher pay for U.S. CEOs