Matching Premiums in the Executive Labor Market

Carter, M E, Franco, F and Tuna, I (2019) Matching Premiums in the Executive Labor Market. Accounting Review, 94 (6). pp. 109-136. ISSN 0001-4826


We study whether executives receive pay premiums for the uncertainty of their match with a new firm. Using changes in executive-firm matches from ExecuComp, we document that executives receive significant attraction premiums when they move to new firms. These premiums vary with proxies that capture potential sources of uncertainty about the quality of the match and are incremental to pay for managerial talent, generalist ability, industry turnover risk, and potential additional costs incurred by the new employer to attract the executive to the firm, such as payments for forfeited equity and relocation costs. Consistent with compensation for uncertainty of fit, we find that the premiums decrease with the executive’s tenure at the new firm, as the uncertainty about the executive-firm match is resolved over time. Our findings raise the possibility that attraction premiums are an additional cost of executive turnover and may contribute to the overall rise in executive pay.

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Item Type: Article
Subject Areas: Accounting
Funder Name: European Research Council
Date Deposited: 22 Mar 2019 11:29
Date of first compliant deposit: 14 Mar 2019
Subjects: Labour economics
Last Modified: 15 Feb 2024 01:43

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