Compensation across executive labor markets: What can we learn from cross-listed firms?
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- Southam, C. & Sapp, S. J Int Bus Stud (2010) 41: 70. doi:10.1057/jibs.2009.34
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There is wide consensus that chief executive officers (CEOs) of US firms earn significantly more than their Canadian counterparts. Using a matched sample, we find that the majority of this difference is due to US CEOs earning 50% more than CEOs of Canadian non-cross-listed firms. We find no such “US premium” for Canadian cross-listed firms, because the use of options allows the cross-listed firms to keep pace with their neighbors to the south. While firms that list only in Canada compete in the labor market defined by their national boundary, cross-listed firms appear to be competing directly with their US counterparts for executive talent. In investigating alternative explanations for the elimination of the compensation differential for Canadian cross-listed firms, we find evidence consistent with both the bonding and the rent extraction hypotheses.