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Using Global Shocks to Understand the Level and Structure of Executive Compensation / David Hummels, Jakob Munch, Huilin Zhang.
- Format:
- Book
- Author/Creator:
- Hummels, David.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w35004.
- NBER working paper series no. w35004
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2026.
- Summary:
- We build a model of CEO compensation that unites principal-agent and assignment models in the face of trade shocks that interact with CEO effort. The model predicts that trade shocks change CEO compensation through scale, volatility, and ability-magnification channels. Using Danish matched worker-firm data, we find empirical support for these channels: (1) Exogenous shocks to trade increase the size and value of the firm and CEO compensation; (2) the share of firm value paid to the CEO is increasing in the size and value of the firm and increasing in the volatility induced by global shocks; (3) Higher-ability CEOs generate increases in firm value that are more than 100 times greater than their compensation, through a combination of mitigating losses and maximizing the return to positive shocks.
- Notes:
- March 2026.
- Print version record
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