Estimating the Mark-to-Market Premium Required to Fill Vacant Business School Faculty Lines: The Case of Finance

Abstract

As the supply of new PhDs in business has declined in the past decade in the face of increasing demand, the cost of filling vacant faculty lines with qualified professors of business has increased substantially. Because salaries of current faculty members normally fail to keep up with market salaries, when a faculty line is vacated the college must pay a premium by offering a higher, competitive salary. In this study, the authors estimated the salary premium associated with filling a vacated finance faculty line. Results from a national survey show that the premiums required for replacing finance faculty members at all ranks are substantial.