Date of Award
2026
Document Type
Thesis
Degree Name
Bachelor of Arts
Department
Economics
First Advisor
Dr. Erik Craft
Second Advisor
Dr. Michael Kerckhove
Abstract
This paper examines the relationship between executive compensation disparity and firm performance using S&P 500 firms. CEO Pay Slice (CPS) is used to measure pay disparity, and firm performance is measured by Tobin’s Q and ROA. The results from fixed effects models show an inverted U-shaped relationship between CPS and firm performance, with performance maximized at approximately a 60% CEO Pay Slice. Further analysis decomposes CPS into fixed and performance-based components. The results show that fixed compensation disparity is positively and consistently associated with firm performance, while performance-based disparity has weaker and less robust effects. Taken together, the findings suggest that moderate and well- structured compensation disparity is associated with higher firm performance.
Recommended Citation
Diep, Anh Que, "Pay Gaps at the Top: How CEO–Executive Compensation Disparity Affect Firm Performance" (2026). Honors Theses. 1899.
https://scholarship.richmond.edu/honors-theses/1899