Wage Gap and Stock Returns
| Autor: | Ingolf Dittmann, Maurizio Montone, Yuhao Zhu |
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| Rok vydání: | 2018 |
| Předmět: |
History
Polymers and Plastics Inequality media_common.quotation_subject Compensation of employees Wage Monetary economics Industrial and Manufacturing Engineering Information asymmetry Economics Capital asset pricing model Portfolio Business and International Management Stock (geology) media_common Inequity aversion |
| Zdroj: | SSRN Electronic Journal. |
| ISSN: | 1556-5068 |
| DOI: | 10.2139/ssrn.3226225 |
| Popis: | textabstractIs the difference in compensation between managers and workers related to the quality of the firm? We propose an asset pricing model with unsophisticated traders and short-sales constraints, in which the optimal wage gap increases with managerial effort. In equilibrium, we show that firms with lower wage gaps should be overpriced. Using a unique data set on German firms' employee compensation, we provide strong support for the model's predictions. We find that a long-short portfolio of stocks with high and low wage gaps, respectively, yields positive and robust risk-adjusted returns. We also show that the overpricing of low wage gap stocks is explained, at least in part, by the presence of inequality-averse investors. Overall, pay inequality within firms has nontrivial implications for stock prices, and seems to reflect fair compensation rather than agency issues. |
| Databáze: | OpenAIRE |
| Externí odkaz: |
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