Zinat Alam , Chinmoy Ghosh , Harley E. Ryan Jr. , Lingling Wang
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引用次数: 0
Abstract
We examine how firms estimate CEO-employee pay ratios in response to the CEO pay ratio rule, the first mandated pay inequality disclosure for U.S. firms. Our findings reveal that firms disclose lower pay ratios when they use more complex methods to identify the median employee. The relation between the estimation method and the disclosed pay ratio is stronger for firms headquartered in states with a greater societal aversion to income inequality and is weaker when CEO pay in the prior year is lower. Firms’ estimation choices do not merely represent selection bias or potentially omitted variables such as firm size, industry, compensation design complexity, or workforce composition – including the presence of foreign, temporary, seasonal, or highly paid employees. Although firms that use more complex methods to identify the median employee disclose lower pay ratios, we find no evidence of real changes in pay inequality among these firms. Our results suggest that some firms use estimation discretion to appear to conform to stakeholders’ preferences instead of taking real actions. These practices call into question the informativeness of CEO pay ratio disclosures, highlighting a potential cost of granting discretion in mandatory ESG disclosures.
期刊介绍:
The Journal of Banking and Finance (JBF) publishes theoretical and empirical research papers spanning all the major research fields in finance and banking. The aim of the Journal of Banking and Finance is to provide an outlet for the increasing flow of scholarly research concerning financial institutions and the money and capital markets within which they function. The Journal''s emphasis is on theoretical developments and their implementation, empirical, applied, and policy-oriented research in banking and other domestic and international financial institutions and markets. The Journal''s purpose is to improve communications between, and within, the academic and other research communities and policymakers and operational decision makers at financial institutions - private and public, national and international, and their regulators. The Journal is one of the largest Finance journals, with approximately 1500 new submissions per year, mainly in the following areas: Asset Management; Asset Pricing; Banking (Efficiency, Regulation, Risk Management, Solvency); Behavioural Finance; Capital Structure; Corporate Finance; Corporate Governance; Derivative Pricing and Hedging; Distribution Forecasting with Financial Applications; Entrepreneurial Finance; Empirical Finance; Financial Economics; Financial Markets (Alternative, Bonds, Currency, Commodity, Derivatives, Equity, Energy, Real Estate); FinTech; Fund Management; General Equilibrium Models; High-Frequency Trading; Intermediation; International Finance; Hedge Funds; Investments; Liquidity; Market Efficiency; Market Microstructure; Mergers and Acquisitions; Networks; Performance Analysis; Political Risk; Portfolio Optimization; Regulation of Financial Markets and Institutions; Risk Management and Analysis; Systemic Risk; Term Structure Models; Venture Capital.