Comparing CEO Compensation between Neighbors : What Can We Learn from Cross-Listed Firms?

There is wide consensus that CEOs of U.S. firms earn significantly more than their Canadian counterparts. Using a matched sample, we find that the majority of this difference is due to U.S. CEOs earning 50% more than CEOs of Canadian non-cross-listed firms. We find no such "U.S. premium" for Canadian cross-listed firms because the use of options allows these firms to keep pace with their neighbors to the south. While firms that list only in Canada compete in the labor market defined by their national boundary, the cross-listed firms appear to be directly competing with their U.S. counterparts for executive talent. That the compensation differential is reduced or eliminated for Canadian cross-listed firms is consistent with bonding through cross-listing rather than market integration