Abstract

I examine whether compensation of the university president is a function of university type (i.e., top, research, master’s, bachelor’s/specialized). Using a panel dataset containing 761 private universities in the United States, I find that (i) the president’s pay is linked to the university’s performance in the previous period and (ii) the pattern of pay for performance varies across universities of different types. Specifically, top universities’ presidents are incentivized to enhance research activities and private contributions; research universities’ presidents are incentivized to increase tuition revenue but not enrollment; master’s and bachelor’s/specialized universities’ presidents are incentivized to increase tuition revenue and expand enrollment. I do not find evidence that presidents’ pay is linked to relative performance evaluation, measured by the institution’s US News & World Report ranking. I obtain these results after using a university-president pair fixed effects model that controls for unobservable university and president characteristics.

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