Date of Award


Degree Name

Doctor of Philosophy



First Advisor

Schipper, Katherine

Second Advisor

Rose, Jacob


Abstract I compare compensation arrangements of firms with private equity and public debt and firms with arrangements public equity and public debt. In a sample of 77 firms, I find that privately held firms offer less bonus compensation in levels, but more as a percentage of total income, less equity compensation, in levels and as a percentage of total income, and less total compensation. I propose and test three possible explanations for these differences. The first explanation is that managers of private firms own more of the company they manage, and thus less annual equity-based compensation is required to align incentives. The tests I employ do not support this hypothesis. Tests of the second explanation, that difficulties associated with the valuation/liquidity of private equity shares drive differences, were significant. The third explanation is that superior monitoring among firms with private debt drives compensation differences. I find no support for this hypothesis. Taken together, these results are consistent with the explanation that privately held firms compensate their managers differently due to the inherent difficulty in valuing and/or liquidating equity shares.




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