Determinants Of Chief Executive Officer Compensation: Some Recent Evidence For The Retail Sales And Food Industries

Abstract

This study examines factors which influence compensation of chief executive officers (CEOs) in the retail sales and foods industries. Because many of the factors which potentially influence compensation are correlated with one another, multicollinearity becomes a problem in regression analysis. To avoid this problem, principal component analysis is employed. Specifically, the relationship of firm performance, firm size, and CEO tenure, all measured as a composite of factors, are studied to determine their influence on CEO compensation. In addition, specific industries are studied in isolation and then in combination to examine the effect of pooling data across industries.