Do compensation consultants enable higher CEO pay? A disclosure rule change as a separating device

Kan Chu, J Faasse & Raghavendra Rau
We investigate the impact of a firm’s compensation consultant choice on executive compensation by examining shifts in consultant choice following a 2009 US Securities Exchange Commission requirement that firms disclose fees paid to compensation consultants for both consulting and other services. We show that the disclosure rule change acted as a separating device distinguishing firms likely to have used compensation consultants to extract rents from shareholders from firms that were likely to have used consultants...
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