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Executive Compensation and Macroeconomic Fluctuations

Oxelheim, Lars LU ; Wihlborg, Clas and Zhang, Jianhua (2008) In Markets and Compensation for Executives in Europe
Abstract
Macroeconomic fluctuations affect corporations’ performance through demand and cost conditions. Incentive effects of performance-based compensation schemes for management may be weakened or biased by macroeconomic influences if management is unable to forecast macroeconomic fluctuations or unable to adjust operations in response to changes in macroeconomic conditions. In this paper we analyze the impact of macroeconomic, industry and firm-specific factors on salaries and bonus of CEOs in 131 Swedish corporations during the period 2001–2006. A distinction is made between anticipated and unanticipated macroeconomic fluctuations. The macroeconomic influences on performance and compensation can be expected to vary from firm to firm in terms of... (More)
Macroeconomic fluctuations affect corporations’ performance through demand and cost conditions. Incentive effects of performance-based compensation schemes for management may be weakened or biased by macroeconomic influences if management is unable to forecast macroeconomic fluctuations or unable to adjust operations in response to changes in macroeconomic conditions. In this paper we analyze the impact of macroeconomic, industry and firm-specific factors on salaries and bonus of CEOs in 131 Swedish corporations during the period 2001–2006. A distinction is made between anticipated and unanticipated macroeconomic fluctuations. The macroeconomic influences on performance and compensation can be expected to vary from firm to firm in terms of magnitude of effects, as well as in terms of relevant macroeconomic variables. The estimates obtained in this paper refer to the average impact across the sample of firms. We find that the average Swedish CEOs’ compensation is explained to a substantial extent by macroeconomic factors; less so by unanticipated factors alone. (Less)
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author
organization
publishing date
type
Chapter in Book/Report/Conference proceeding
publication status
published
subject
keywords
executive compensation, macroeconomic factors, cash compensation
in
Markets and Compensation for Executives in Europe
editor
Oxelheim, Lars and Wihlborg, Clas
publisher
Emerald Group Publishing Limited
ISBN
9780080557380
language
English
LU publication?
yes
id
efd9aa41-863d-4278-acd1-37c32b99a2ea (old id 1513970)
date added to LUP
2009-12-16 10:07:14
date last changed
2016-08-31 14:38:46
@misc{efd9aa41-863d-4278-acd1-37c32b99a2ea,
  abstract     = {Macroeconomic fluctuations affect corporations’ performance through demand and cost conditions. Incentive effects of performance-based compensation schemes for management may be weakened or biased by macroeconomic influences if management is unable to forecast macroeconomic fluctuations or unable to adjust operations in response to changes in macroeconomic conditions. In this paper we analyze the impact of macroeconomic, industry and firm-specific factors on salaries and bonus of CEOs in 131 Swedish corporations during the period 2001–2006. A distinction is made between anticipated and unanticipated macroeconomic fluctuations. The macroeconomic influences on performance and compensation can be expected to vary from firm to firm in terms of magnitude of effects, as well as in terms of relevant macroeconomic variables. The estimates obtained in this paper refer to the average impact across the sample of firms. We find that the average Swedish CEOs’ compensation is explained to a substantial extent by macroeconomic factors; less so by unanticipated factors alone.},
  author       = {Oxelheim, Lars and Wihlborg, Clas and Zhang, Jianhua},
  editor       = {Oxelheim, Lars and Wihlborg, Clas},
  isbn         = {9780080557380},
  keyword      = {executive compensation,macroeconomic factors,cash compensation},
  language     = {eng},
  publisher    = {ARRAY(0xba6eec8)},
  series       = {Markets and Compensation for Executives in Europe},
  title        = {Executive Compensation and Macroeconomic Fluctuations},
  year         = {2008},
}