Work detail

Catholic Religion, Corporate Governance, and Executive Compensation

Author: Mgr. Jan Šarapatka
Year: 2016 - summer
Leaders: Jiří Novák M.Sc., Ph.D., Deloitte Corporate Chair
Consultants:
Work type: Finance, Financial Markets and Banking
Masters
Language: English
Pages: 84
Awards and prizes:
Link: https://is.cuni.cz/webapps/zzp/detail/165880/
Abstract: I find a significant positive compensation premium for executives employed by firms
headquartered in Catholic counties. I document that the compensation premium holds only for
board member executives and that it is related to weaker corporate governance in Catholic
regions. In addition, I explore several corporate governance measures and reveal that weaker
corporate governance is a result of more developed connection networks among executives in
Catholic regions. I document that even though a denser executive’s social network is associated
with worse operating performance, it enables the executive to reach higher pay. Therefore, I
suggest that executives in Catholic regions are using their more developed social networks and
weaker corporate governance to extract additional rents from the firm. My findings are consistent
with a larger development of social ties in more community-focused Catholic regions than in
more individualistic Protestant regions. I contribute by showing how religion deters efficiency of
the top executive labor market through social ties.
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