Abstract
We examine how going public via an IPO impacts the compensations of the CEO and average employees and the resulting pay disparity, and what board characteristics matter for this relation. Using a sample of Swedish firms from 2005 to 2017 and the difference-in-difference method, we find that pay levels of employees and the CEO is higher after IPO compared to the pre-IPO in IPO firms than in matched private firms, but the increase in the compensation of the CEO is substantially higher than that of average employees, leading to an increase in the CEO-employee pay dispersion. Examining the board characteristics, we find that venture capital board membership and board IPO experience can mitigate the increase in CEO-worker pay dispersion after the IPO. The results suggest the board characteristics that allow for more effective monitoring of the firm compensation system during and after IPO and have important theoretical implications for the literatures on IPO and pay disparity.
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