Using a broad-based sample of small businesses, we analyze the relation between accounting-based firm performance measures and executive compensation for S-corporations, and C-corporations. After controlling for the potential endogeneity associated with the choice of organizational form, we find a positive relation between executive pay and ROA in S-corporations and C-corporations. We also find a positive relation between executive pay and total asset turnover but the relation is stronger for S-corporations. We document a positive relation between executive salaries and more diffuse ownership, owner managers, and when the founder is the current owner. We find a negative relation between executive salaries and firms with greater than fifty percent family ownership.
G32, L25, M12, M52
Compensation , Executive Compensation , Executives
Farrell, Kathleen A. and Winters, Drew B.
"An Analysis of Executive Compensation in Small Businesses,"
Journal of Entrepreneurial Finance and Business Ventures:
3, pp. 1-21.
Available at: http://digitalcommons.pepperdine.edu/jef/vol12/iss3/2