Executive compensation and firm performance in Italy

We use survey data to investigate the determinants of executive pay in a sample of Italian firms. To the best of our knowledge this is the first empirical study on the compensation of Italian executives. Our key hypothesis is that the characteristics of the Italian capital market, corporate governan...

Full description

Saved in:
Bibliographic Details
Published in:International journal of industrial organization 2001, Vol.19 (1), p.133-161
Main Authors: Brunello, Giorgio, Graziano, Clara, Parigi, Bruno
Format: Article
Language:English
Subjects:
Agency theory
Capital market
Compensation
Corporate governance
Corporate profits
Economic models
Economic performance
Executive compensation
Hypotheses
Italy
Pay for performance
Principal-agent
Principal-agent theory
Studies
Wages
Citations: Items that this one cites
Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:We use survey data to investigate the determinants of executive pay in a sample of Italian firms. To the best of our knowledge this is the first empirical study on the compensation of Italian executives. Our key hypothesis is that the characteristics of the Italian capital market, corporate governance and the specific relationship between banks and firms imply a low fraction of incentive pay over total compensation and a low sensitivity of incentive pay to firm performance. We find evidence that supports this hypothesis. We estimate that an increase of real profits per firm by 1 billion lire increases the pay of upper and middle managers by only 31 thousand lire, more than the increase found for lower management (6 thousand). Furthermore, pay–performance sensitivity is higher in foreign-owned firms, in listed firms, and in firms affiliated to a multinational group.
ISSN:0167-7187
1873-7986
DOI:10.1016/S0167-7187(99)00026-0