Abstract
We examine how directors’ political ideology shapes rank-and-file employee compensation. Using over 400,000 H-1B applications from 2008–2022, we document that firms with Republican-leaning directors pay approximately 12% lower wages to H-1B workers than those with Democratic-leaning boards, after controlling for firm, job, and location characteristics. These findings are consistent with agency theory and upper-echelons theory, which predict that managerial preferences influence organizational policies when discretion is high. The wage gap intensifies among financially constrained firms, firms with greater labor market bargaining power, and in political environments with weaker scrutiny of rent-extracting practices. We argue that the underlying mechanism reflects managerial rent-seeking that exploits the labor market frictions uniquely faced by H-1B workers. Lower wages yield no measurable gains in firm innovation or market valuation, indicating that this managerial behavior reflects insider extraction of worker surplus rather than efficient compensation design.
Emily Kim
Assistant Professor of Finance
My research interests cover a variety of topics on empirical corporate finance including information dissemination, innovation, initial public offerings, social finance, and labor economics.