Within Firm Pay Inequality

Download or read book Within-Firm Pay Inequality written by Holger M. Mueller and published by . This book was released on 2017 with total page 49 pages. Available in PDF, EPUB and Kindle. Book excerpt: Financial regulators and investors alike have expressed concerns about high pay inequality within firms. Using a proprietary data set of public and private firms, this paper shows that firms with higher pay inequality - relative wage differentials between top- and bottom-level jobs - are larger and have higher valuations and stronger operating performance. Moreover, firms with higher pay inequality exhibit larger equity returns and greater earnings surprises, suggesting that pay inequality is not fully priced by the market. Our results support the notion that differences in pay inequality across firms are a reflection of differences in managerial talent.