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Urban Agglomeration and CEO Compensation

Published online by Cambridge University Press:  29 December 2016

Bill B. Francis ,
Iftekhar Hasan ,
Kose John  and
Maya Waisman
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Abstract

We examine the relation between the agglomeration of firms around big cities and chief executive officer (CEO) compensation. We find a positive relation among the metropolitan size of a firm’s headquarters, the total and equity portion of its CEO’s pay, and the quality of CEO educational attainment. We also find that CEOs gradually increase their human capital in major metropolitan areas and are rewarded for this upon relocation to smaller cities. Taken together, the results suggest that urban agglomeration reflects local network spillovers and faster learning of skilled individuals, for which firms are willing to pay a premium and which are therefore important factors in CEO compensation.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 51 , Issue 6 , December 2016 , pp. 1925 - 1953
Copyright
Copyright © Michael G. Foster School of Business, University of Washington 2016 

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