Matching Premiums in the Executive Labour Market

We investigate whether executives receive pay premiums for the uncertainty of their match with new firms and/or new roles. Using changes in executive role-firm matches from the 1992- 2007 ExecuComp population, we document that executives receive pay premiums when they move to a new company, incremental to premiums for managerial talent or generalist ability, consistent with compensation for uncertainty of fit. We validate this evidence with proxies that capture potential sources of uncertainty about the quality of the match. Finally, we document that the premiums paid to executives for the uncertainty of their fit with a new firm are greater than the premiums paid to executives for changing their managerial roles within the same firm.

This seminar is organised by the Erasmus Accounting Research Group.