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Nonmonetary Benefits, Quality of Life, and Executive Compensation

Published online by Cambridge University Press:  23 January 2013

Xin Deng  and
Huasheng Gao
Xin Deng
Affiliation:
[email protected], School of Finance, Shanghai University of Finance and Economics, 777 Guoding Rd, Shanghai 200433, China;
Huasheng Gao
Affiliation:
[email protected], Nanyang Business School, Nanyang Technological University, S3-B1A-06, 50 Nanyang Ave, Singapore 639798, Singapore.
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Abstract

We examine the effects of nonmonetary benefits on overall executive compensation from the perspective of the living environment at the firm headquarters. Companies in polluted, high crime rate, or otherwise unpleasant locations pay higher compensation to their chief executive officers (CEOs) than companies located in more livable locations. This premium in pay for quality of life is stronger when firms face tougher competition in the managerial labor market, when the CEO is hired from outside, and when the CEO has short-term career concerns. Overall, the geographic desirability of the corporate headquarters is an effective substitute for CEO monetary pay.

Type
Research Articles
Information
Journal of Financial and Quantitative Analysis , Volume 48 , Issue 1 , February 2013 , pp. 197 - 218
Copyright
Copyright © Michael G. Foster School of Business, University of Washington 2013 

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