Working Paper Series
Executive Compensation and Macroeconomic Fluctuations
(), Clas Wihlborg and Jianhoa Zhang
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
Keywords: Executive Compensation; Macroeconomic Factors; Cash Compensation; (follow links to similar papers)
JEL-Codes: L14; L16; M14; M21; M52; (follow links to similar papers)
37 pages, April 21, 2008
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- This paper is forthcoming as:
Oxelheim, Lars, Clas Wihlborg and Jianhoa Zhang, Executive Compensation and Macroeconomic Fluctuations, Emerald Publishing, Bingley, UK.
Oxelheim, Lars, Clas Wihlborg and Jianhoa Zhang, 'Executive Compensation and Macroeconomic Fluctuations', in Oxelheim, Lars and Clas Wihlborg (eds.) Markets and Compensation for Executives in Europe, Emerald Publishing, Bingley, UK
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