The Interrelationship of CEO Nationality with Financial Management, Firm Performance, and CEO Compensation

The Journal of Diversity Management, Vol. 2, No, 2, pp. 7-23, 2nd Quarter 2007

19 Pages Posted: 27 Aug 2009 Last revised: 10 May 2011

See all articles by Terrance Jalbert

Terrance Jalbert

University of Hawaii - Department of Business Administration

Canri Chan

affiliation not provided to SSRN

Mercedes Jalbert

The Institute for Business and Finance Research

Steven P. Landry

Naval Postgraduate School

Date Written: 2007

Abstract

In this exploratory research, and driven by intense interest in media focused attention on the apparently wide differential in pay contrast between US top managers in large corporations versus their non-US top managers, we examined the backgrounds of the highest paid Chief Executive Officers (CEOs) in the United States. Specifically, we investigated the extent to which national origin, which we used as a proxy for cultural background, of CEOs affected salaries received, the way firms were managed and how firms performed. The data for the study was derived from the Forbes 800 CEO compensation data. The data extended from 1991-1997 and included 4,834 observations. Regressions were run to determine the extent to which the birthplace of the CEO affected the salary that the CEO received, along with the capital structure, dividend policy and return on assets of the firm. The results indicated that CEOs with differing nationalities were compensated differently, and operated their firms differently than U.S. born CEOs. The compensation of the CEOs was found to be higher for some groups of foreign born CEOs. Some evidence of differing capital structures was found. However, the results were not significant after incorporating the full set of control variables into the regressions. CEOs from Central and South America paid out larger percentages of firm earnings to owners in the form of dividends than other CEOs. Finally, the study found some evidence to suggest that Central and South America born CEOs, and Australian and New Zealand born CEOs earned a higher return on assets than other CEOs.

Keywords: CEO Compensation, CEO Performance, Executive Compensation

JEL Classification: J33, M52

Suggested Citation

Jalbert, Terrance and Chan, Canri and Jalbert, Mercedes and Landry, Steven P., The Interrelationship of CEO Nationality with Financial Management, Firm Performance, and CEO Compensation (2007). The Journal of Diversity Management, Vol. 2, No, 2, pp. 7-23, 2nd Quarter 2007, Available at SSRN: https://ssrn.com/abstract=1461873

Terrance Jalbert (Contact Author)

University of Hawaii - Department of Business Administration ( email )

808-974-7456 (Phone)

Canri Chan

affiliation not provided to SSRN ( email )

Mercedes Jalbert

The Institute for Business and Finance Research ( email )

P.O. Box 5569
Hilo, HI 96720
United States

HOME PAGE: http://www.theIBFR.com

Steven P. Landry

Naval Postgraduate School ( email )

Graduate School of Business & Public Policy
555Dyer Road
Monterey, CA 93943
United States
831-656-7762 (Phone)

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