Committee Members: Dr. Kathy Rupar (Chair), Dr. Jane Thayer,  Dr. Jason Kuang, Dr. Robbie Moon, Dr. Shankar Venkataraman (Bentley University)

Title: The Effect of Accessibility of Status-confirming Information on Investor Reactions to the Pay-ratio Disclosure.

Dissertation overview:

The SEC provides companies with considerable flexibility in the disclosure of the ratio between CEO and median employee compensation (pay-ratio). Prior research suggests that pay-ratio disclosures negatively affect investors’ support for executive compensation (SoP). Using two experiments, I find that accessibility of information that helps justify the gap between CEO and median employee compensation (status-confirming information) increases nonprofessional investors’ support for executive compensation (SoP support). Drawing on research in psychology, in experiment 1, I predict that accessibility of status-confirming information increases investors’ perceptions of meritocracy especially when the pay-ratio is higher than the peer companies which helps investors rationalize the compensation gap made salient by the pay-ratio. I find that investors’ perceptions of meritocracy positively influence their SoP support. However, accessibility of status-confirming information does not increase perceptions of meritocracy when pay-ratio is higher than peer companies. I conduct a second experiment to investigate this inconsistent result. In experiment two, I find that investors’ perceptions of wealth and accessibility of status-confirming information affect both investors’ perceptions of meritocracy and SoP support when pay-ratio is higher than peer companies. Together, my findings provide evidence that the content of the pay-ratio disclosure apart from the disclosure itself could systematically affect investor decisions.