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Journal of Management and Governance

Erschienen in:

04.05.2017

Does location influence executive compensation? Evidence from Canadian SMEs

verfasst von: Harjeet S. Bhabra, Ashrafee T. Hossain

Erschienen in: Journal of Management and Governance | Ausgabe 1/2018

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Abstract

We examine the impact of geographic location on the level and structure of executive compensation of small and medium enterprises (SMEs) in Canada, using a panel data sample between 2008 and 2011. Our results show that SMEs pay a higher price for talent by paying a large proportion (71%) of compensation as guaranteed cash pay to their executives. We also report a strong influence of location on compensation structure. Specifically, rural firms pay 13% more incentive based equity pay to their executives compared to their size matched urban counterparts. However, there is no difference between the total compensation for managers of rural and urban firms after controlling for the cost of living index. In cross-sectional tests, we observe that total compensation is positively related to CEO/Chair duality and family ownership but is not related to management quality. In addition, we find that rural firms display a higher pay-performance sensitivity.

Vorheriger Artikel Product market competition and analyst following

Nächster Artikel Corporate divestiture and performance: an institutional view

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Extant literature also shows that management compensation contracts can have a significant impact on the long run operating performance of firms. For example, Datta et al. (2001) show that managers whose compensation is more equity-based tend to make value maximizing acquisitions and these firms do better than all acquirers in general.

Loughran (2008) also finds that rural firms are 1.5% less likely to conduct seasoned equity offerings than their urban counterparts, and when they do they tend to use lower quality underwriters than similar urban firms.

We thank Kenneth French’s online data library for providing us with the Fama–French industry definitions.

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Titel: Does location influence executive compensation? Evidence from Canadian SMEs
verfasst von: Harjeet S. Bhabra
Ashrafee T. Hossain
Publikationsdatum: 04.05.2017
Verlag: Springer US
Erschienen in: Journal of Management and Governance / Ausgabe 1/2018
Print ISSN: 1385-3457
Elektronische ISSN: 1572-963X
DOI: https://doi.org/10.1007/s10997-017-9377-5

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