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Tervio, Marko. 2008. "The Difference That CEOs Make: An Assignment Model Approach."
,
98(3): 642-68.
Show Article Details
DOI: 10.1257/aer.98.3.642
Abstract:This paper presents an assignment model of CEOs and firms. The distributions
of CEO pay levels and firms' market values are analyzed as the competitive
equilibrium of a matching market where talents, as well as CEO positions,
are scarce. It is shown how the observed joint distribution of CEO pay and
market value can then be used to infer the economic value of underlying
ability differences. The variation in CEO pay is found to be mostly due
to variation in firm characteristics, whereas implied differences in
managerial ability are small and make relatively little difference to
shareholder value.
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Authors:
Tervio, Marko (U CA, Berkeley)
JEL Classifications:
G32: Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure
L25: Firm Performance: Size, Diversification, and Scope
M12: Personnel Management; executive compensation
M52: Personnel Economics: Compensation and Compensation Methods and Their Effects
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