Simultaneous relationship between performance and executive compensation of Thai non-financial firms

2017 ◽  
Vol 25 (3) ◽  
pp. 404-423 ◽  
Author(s):  
Wonlop Buachoom
Keyword(s):  
Human Capital ◽  
Firm Performance ◽  
Stock Market ◽  
Executive Compensation ◽  
Pay For Performance ◽  
Content Type ◽  
Subsequent Performance ◽  
Financial Firms ◽  
Performance System ◽  
The Relationship

Purpose The purpose of this paper is to determine the two-direction relationship between financial firm performance and executive compensation in Thai listed companies; that is, effect of firm performance on executive compensation and the effect of executive compensation on subsequent firm performance. In investigating the relationship, governance, firm-specific and human capital characteristics, which should influence on the pay-performance system, are also considered. This study helps to shape an understanding of the effectiveness of the incentive system in the Thai context. Design/methodology/approach The System GMM, with concern about the endogeneity problem of the simultaneous relationship, is applied to examine the relationship between firm performance and executive compensation. The samples to investigate this relationship composed of 5,139 firm-years observations for 15 years from the years 2000 to 2014 of 432 non-financial firms in the Thai stock market. Findings The empirical evidence reveals simultaneous relationship between performance and executive compensation in Thai stock market. It shows that compensation of executives in Thai firms corresponds to firm performance, and compensation of executives leads to an improvement in subsequent performance of Thai listed firms. Moreover, some corporate governance mechanisms and human capital of executives also revealed their particular effects on setting of the pay for performance system in Thailand. Originality/value This study confirms that the pay for performance system is applicable in Thailand. Furthermore, the empirical results of this study highlight effects of some governance and human capital characteristics on setting of the pay-performance system. Thus, this study should be a part of the growing body of literature in this area.

An empirical study of the relationship between accounting conservatism and executive compensation-performance sensitivity

2019 ◽  
Vol 27 (1) ◽  
pp. 130-150 ◽  
Author(s):  
Xi Zhang ◽  
Simon Gao ◽  
Yi Zeng
Keyword(s):  
Executive Compensation ◽  
Positive Association ◽  
Accounting Conservatism ◽  
Governance Mechanism ◽  
Content Type ◽  
Financial Firms ◽  
Performance Sensitivity ◽  
Moral Risk ◽  
Measure Of Performance ◽  
The Relationship

Purpose The purpose of this paper is to study the relationship between accounting conservatism and executive compensation-performance sensitivity with a view to identify the influence of accounting conservatism on the efficiency of executive compensation contracts. Design/methodology/approach This study uses multiple regression models based on the approach of Iyengar and Zampelli (2010), Clarkson et al. (2011) and Huang and Kisgen (2013) with the data from all of China’s listed non-financial firms over the period of 10 years to test the relationship between accounting conservatism and the sensitivity of executive compensation-performance. Findings This study finds a positive association between executive compensation and accounting-based measure of performance. More importantly, it reveals that conservatism has a positive relation with the executive compensation-performance sensitivity after controlling for a number of firm-specific factors and control variables. This study shows that the sensitivity of executive compensation to firm performance is higher for firms with higher accounting conservatism. Originality/value This is one of the few studies to examine the relationship between accounting conservatism and executive compensation-performance sensitivity. It provides supportive evidence to the argument that accounting conservatism, being an efficient governance mechanism, can help mitigate information risk and moral risk for agency problems.

Ownership concentration, ownership composition and the performance of the Kuwaiti listed non-financial firms

2015 ◽  
Vol 25 (1) ◽  
pp. 108-132 ◽  
Author(s):  
Mejbel Al-Saidi ◽  
Bader Al-Shammari
Keyword(s):  
Corporate Governance ◽  
Firm Performance ◽  
Arab Countries ◽  
Ownership Concentration ◽  
Content Type ◽  
Financial Firms ◽  
Large Shareholders ◽  
Ownership Composition ◽  
The Relationship

Purpose – This paper aims to investigate the relationship between ownership structure (ownership concentration and ownership composition) and firm performance in Kuwaiti non-financial firms. To this end, it examines the relationship between firm performance and ownership concentration to determine whether the impact of this relationship is conditional on the nature of the large shareholders. Design/methodology/approach – First, the relationship between ownership concentration and firm performance was tested using ordinary least squares regressions on 618 observations (103 listed firms) from 2005 to 2010; next, the ownership compositions were classified as institutional, government and individuals (families) and their impact on firm performance examined. Findings – The overall concentration ownership by large shareholders showed no impact on firm performance. However, when the type of shareholders was introduced, only the government and individuals (families) ownership categories influenced firm performance. Therefore, certain types of shareholders are better at monitoring, and not all concentration by large shareholders is beneficial to Kuwaiti firms. Research limitations/implications – This study examined only one important aspect of the corporate governance mechanisms, namely, ownership concentration. Thus, further study may include other mechanisms such as board variables, role of debt and shareholders rights in examining the firm performance. This study is limited to the Kuwaiti environment, and thus, next step can be very useful in case of comparing ownership concentration in the Gulf Cooperation Council (Kuwait, Bahrain, Qatar, Oman, United Arab Emirates and Saudi Arabia) or across different Arab countries. Practical implications – The results of this study have important implications for the regulators in Kuwait in their efforts to increase the efficiency of the rapidly developing capital markets and in protecting investors and keeping confidence in the economy. They may mandate a corporate governance code to protect minority shareholders. Investors may use the findings to understand Kuwaiti companies. Such findings may assist them to diversify their investment portfolios. Originality/value – This paper extends literature review by investigating the role of large shareholders in the context of a developing country that is characterized by high level of ownership concentration and weak legal protection for investors as well as the absence of code that organized the corporate governance practices.

Organizational rewards: considering employee need in allocation

2014 ◽  
Vol 43 (1) ◽  
pp. 74-95 ◽  
Author(s):  
Jillian Webb Day ◽  
Courtney L. Holladay ◽  
Stefanie K. Johnson ◽  
Laura G. Barron
Keyword(s):  
Performance Management ◽  
Pay For Performance ◽  
Medical Center ◽  
Academic Medical Center ◽  
Employee Communication ◽  
Content Type ◽  
Organizational Settings ◽  
Performance System ◽  
Reward Allocation ◽  
The Relationship

Purpose – The purpose of this study is to investigate how employee need relates to rewards and employee perceptions of fairness within an organization in the USA using a pay-for-performance system. Design/methodology/approach – To evaluate the presence of a relationship between employee need and reward allocation in a pay-for-performance system, a questionnaire was administered to a sample of 292 employees from two departments at an academic medical center. Findings – The findings highlight the positive relationship between employee need and reward allocation that remains when controlling for employee performance evaluation ratings. Findings further show that employee communication with the manager about need explains this relationship. Research limitations/implications – The findings make two important contributions to research on reward allocation and performance management. First, the results show employee need is related to the allocation of rewards in organizational settings outside of collectivistic cultures or developing countries. Second, by demonstrating the role of employee communication with managers about need within the relationship between employee need and reward allocation, the paper provides a more detailed understanding of additional factors related to compensation decisions in a pay-for-performance system. Originality/value – Little research has explored the relationship between employee need and reward decisions at an individual level in organizational settings within individualistic cultures. The findings from this study address this gap by establishing the presence of this relationship in a pay-for-performance reward-based organization with service-based values. This finding is timely due to the current economic downturn experienced by organizations, and thereby the level of employee need observed in Western individualistic cultures.

Managerial power, agency cost and executive compensation – an empirical study from China

2016 ◽  
Vol 10 (1) ◽  
pp. 119-137 ◽  
Author(s):  
Xiaohong Zhang ◽  
Gaowen Tang ◽  
Zhaohong Lin
Keyword(s):  
Stock Market ◽  
Executive Compensation ◽  
Listed Companies ◽  
Agency Cost ◽  
Senior Executives ◽  
Compensation Contracts ◽  
Content Type ◽  
Optimal Contracting ◽  
Managerial Power ◽  
The Relationship

Purpose Based on the theory of “optimal contracting approach” and “the managerial power approach”, this paper aims to investigate whether senior executives of listed companies in China make use of their power to gain their own private benefits. The paper also compares compensation contracts between state- and private-owned enterprises to test whether there is a significant difference between senior executives from different ownership types of enterprises in terms of compensation contracts. Design/methodology/approach The paper raises four hypotheses based on the theories of “company agency”, “optimal contracting approach” and “managerial power approach”. After that, 5,680 A-share-listed companies of stock market in Shanghai and in Shenzhen Stock Market from 2008 to 2012 were taken as research samples to conduct a series of research analysis, including t-test, reliability analysis and regression analysis, with the help of SPSS 18.0. Findings The senior executives of listed companies in China could make use of their power to increase their own salary to gain power pay and, at the same time, company performance, company size and other factors that are important to influence the executive compensation. This paper further argues that senior executives of private-owned listed companies are more likely to use their power to obtain power pay and increase their own compensation. Additionally, the agency costs of Chinese listed companies are negatively related to the performance pay of senior executives, whereas there is no obvious negative correlation with the power pay of senior executives. Practical implications This paper takes multiple, in-depth approaches to study the relationship among managerial power, agency cost and executive compensation and to find out the differences in compensation contracts of senior executives between private-owned listed companies and state-owned companies. It also provides necessary suggestions to ensure the interests of stockholders, such as: optimizing the management structure of listed companies; improving the transparence of information disclosure of listed companies; establishing effective mechanism of incentive and constraint; and improving and standardizing the market of professional managers. Social implications The compensation contract of senior executives in China is critical to enhance enterprises’ performance, and it will become an important factor that will facilitate the interests of stockholders and management. However, this paper argues that some phenomena of over-payment of senior executives in listed companies cannot be explained by the theory of “optimal contracting approach”, but it is necessary and important to compare the differences of compensation contract of senior executives between private-owned listed companies and state-owned companies. A series of findings are proposed in this paper. Originality/value This paper made use of a principal analysis to extract the main factors that could represent the managerial power from different angles. In addition, this paper also compared the differences between compensation contracts of senior executives between private-owned listed companies and state-owned companies. Additionally, in this paper, the compensation of senior executives was divided into “power compensation” and “performance compensation”, which were used to test the relationship with the management cost of companies.

The influence of investors’ opinions of human capital and multitasking on firm performance: a knowledge management perspective

2020 ◽  
Vol 24 (7) ◽  
pp. 1585-1603
Author(s):  
Shashank Vaid ◽  
Benson Honig
Keyword(s):  
Human Capital ◽  
Knowledge Management ◽  
Firm Performance ◽  
Small Firms ◽  
Abnormal Returns ◽  
Content Type ◽  
Managerial Succession ◽  
Top Executive ◽  
The Impact ◽  
The Relationship

Purpose The purpose of this study is to examine the disruption-adaptation associated with knowledge management (KM) of entrepreneurial multitasking of top strategy and tactics executive (TSTE) succession in positions responsible for both S and T. This provides insight into KM and firm performance during turbulent periods. Design/methodology/approach The study examines investor’s opinions of human capital in the context of managerial succession. The data was based on 900 publicly available appointment announcements between 2006–2014, allowing for the examination of 459 observations of succession in 51 industries. Findings The findings indicate that the relationship between KM of entrepreneurial multitasking and firm performance was more positive for high innovation firms than for low innovation firms. As well, the relationship between investors’ opinions of a top executive manager’s human capital and firm performance is more positive for small firms than for large firms and more positive for high innovation firms than for low innovation firms. Research limitations/implications The study contributes to the literature by systematically examining the announced appointment of executives in one context where KM of entrepreneurial multitasking is prevalent – across marketing strategy and sales tactics (hereafter, S and T) responsibilities – for multiple firms listed at major US stock exchanges across a wide range of industries, using lagged performance data to discern performance outcomes. It highlights important issues related to organizational structure and human capital for firm performance and KM in dynamic environments. Further research could examine the impact on firm performance of a change in structure – from a joint sales and tactics position to a sales or tactics position and vice versa. By studying the impact of change to and from an intertwined position, future scholars can determine the level of risk stemming from coordination uncertainty changes with time. Practical implications Of practical relevance, the study shows that vesting dual responsibility for S and T in one executive during managerial succession may not be as universally valuable or adaptive as previously thought. One practical extension of this research may also be that larger firms that are more likely to have clearly defined silos may find that such vesting of multitasking responsibility not as valuable. High innovation and small firms may gain from new executives’ multitasking responsibility for S and T. Thus, firms should think twice before vesting S and T responsibilities with one incoming executive during the leadership change. Social implications Responsibility for both S and T compounds ambiguous accountability, frequently leaving the locus of customer-related problems unclear, and therefore unsolved. Originality/value Extant research has overlooked the relationship between the top management team’s (TMT) abilities to multitask firm performance over time across contexts of external and internal change, operationalized as firm innovation and firm size. Nor have studies explored the firm performance implications of external stakeholders’ opinions of such human capital across these contexts. A novel measure of executive-specific human capital – abnormal returns generated the appointment announcement, is introduced. Understanding the capability of a top executive to simultaneously multitask both S and T responsibilities is a critical component of KM; also relevant are investors’ opinions of their human capital, a particular oversight given the challenge of the “great transformational leader” with servant leadership theory (Carayannis et al., 2017; Gregory Stone et al., 2004).

Interpreting the dynamic performance effect of intellectual capital through a value-added-based perspective

2020 ◽  
Vol 21 (3) ◽  
pp. 381-401 ◽  
Author(s):  
Irene Wei Kiong Ting ◽  
Chunya Ren ◽  
Fu-Chiang Chen ◽  
Qian Long Kweh
Keyword(s):  
Human Capital ◽  
Firm Performance ◽  
Intellectual Capital ◽  
Dynamic Performance ◽  
Value Added ◽  
Ordinary Least Squares ◽  
Least Squares Regression ◽  
Content Type ◽  
Capital Efficiency ◽  
The Relationship

PurposeThe question of whether intellectual capital (IC) is beneficial to firm performance is debatable because of the diverse effects of IC and its components on firm performance. Building on the concept of pay–performance relation, this study aims to provide new insights into how changes in IC affect changes in firm performance.Design/methodology/approachData envelopment analysis is employed to measure firm performance, and value-added intellectual coefficient (VAIC™) is selected to evaluate the IC and its components, namely human capital efficiency (HCE), structural capital efficiency (SCE), and capital employed efficiency (CEE). Ordinary least squares regression is applied to study the relationship between changes in IC and changes in firm performance using 6,408 firm-year observations of electronics companies listed in Taiwan from 2006 to 2017.FindingsEmpirical results suggest that IC efficiency and CEE significantly and negatively affect firm performance, thereby suggesting a contradictory common sense with the resource-based view on the beneficial effects of IC. However, changes in IC efficiency and HCE are significantly and positively related to changes in firm performance, including changes in firm efficiency and sales growth.Practical implicationsThis study suggests that managers should continuously pay attention to adjusting their IC, especially human capital (HC) for better decisions that help grow firm performance. Moreover, investors can grasp how sensitive firm performance is to IC.Originality/valueThis study argues the relationship between IC and firm performance in the same vein as a pay-for-performance link, suggesting that future studies should account for increases or decreases in IC.

Executive compensation and securitization: pre-and post-crisis

2014 ◽  
Vol 15 (4) ◽  
pp. 437-457 ◽  
Author(s):  
Elizabeth Cooper ◽  
Andrew Kish
Keyword(s):  
Executive Compensation ◽  
Pay For Performance ◽  
Chief Executive ◽  
Executive Pay ◽  
Pay Gap ◽  
Content Type ◽  
Ceo Pay ◽  
The Difference ◽  
Recent Financial Crisis ◽  
The Relationship

Purpose – The purpose of this paper is to study bank executive compensation and securitization, two important strategic developments in finance that are central to the debate on the cause of the crisis. Design/methodology/approach – We study the relationship between securitization and executive pay in a sample of US banks from 2001 to 2010, using a series of multivariate regression models to test our hypotheses. Findings – Bank Chief Executive Officer (CEO) pay exhibits a positive pay-for-performance relationship. Since the crisis, this relationship is weakened. For banks that securitize, we find that prior to the crisis, higher securitization activity led to higher CEO compensation levels. While we do not find that securitization is related to bank CEO pay gap (the difference between CEO and the next-highest paid bank executive), we do see that bank ratings are a factor in pay gap and compensation level. Research limitations/implications – Bank regulatory ratings influence the relationship between compensation and securitization. Also, the relationship differs pre- and post-crisis. Originality/value – Our study is unique for several reasons. First, we look at the relationship between compensation and securitization over a time period that includes the recent financial crisis. Second, we include an analysis of pay gap. Third, we include bank regulatory ratings, which are proprietary and therefore not available for use in many banking studies.

Moderating Effect of Access to Finance and Competitive Environment on Human Capital, Knowledge Management, Market Orientation and SMES Performance

2020 ◽  
Vol 11 (1) ◽  
pp. 105-105
Author(s):  
Mohd Noor Mohd Shariff ◽  
Khansa Masood ◽  
Halim Mad Lazim
Keyword(s):  
Human Capital ◽  
Knowledge Management ◽  
Firm Performance ◽  
Market Orientation ◽  
Competitive Environment ◽  
Leather Industry ◽  
Access To Finance ◽  
Economic Development And Growth ◽  
Dependent Variables ◽  
The Relationship

Small and medium enterprises (SMEs) are considered as foundation stones of economic development and growth of any economy (Centobelli, Cerchione, & Esposito, 2019). Performance of SMEs is of fundamental significance for all developed as well as developing nations. Similarly, Pakistan is no exception to aforementioned fact. The economic development and growth of Pakistan depend on the performance of SMEs to a great extent. Like, most countries in the world, SMEs comprise more than 90% of total business entities in Pakistan (Degong et al., 2018; Waqas & Nawaz, 2019) and leather industry in one that is attracted by the researchers of present study. Constraints in the growth of leather industry of Pakistan include, lack of skilled human capital, rising cost of production, lack of modern-day knowledge about new products and processes, low profitability and lack of capability to penetrate into international markets, lack of market research, access to finance, intensive competitive rivalry (Khalique et al., 2011; Daily Times, 2016, Awan et al., 2019). Few studies have revealed mixed findings regarding the relationship between knowledge management and firm performance and there is abundance of literature that demonstrates the presence of significant and positive relationship between Market Orientation and Firm performance (Slater & Narver , 1995; Baker & Sinkula, 2009; Udriyah, Tham, & Azam, 2019). On the other hand, some studies have argued that there is no direct and significant relationship between Market Orientation and Firm Performance (Polat & Mutlu, 2012; Shehu & Mahmood, 2014). Moreover, keeping in view the mixed and inconclusive findings regarding the relationship between cause and effect variables, it is appropriate to introduce moderating variables that can significantly influence the relationship between independent and dependent variables as recommended by Baron and Kenny (1986). Access to Finance and Competitive Environment can be served as prospective moderators which are quite appropriately related to proposed variables of the study (Prajogo & Oke, 2016; Rogo et al., 2016; Jaworski & Kohli, 1993) which are quite appropriately related to selected variables of the study. Thus, the research problem expressed that "Access to finance and competitive environment can potentially moderates and affect the relationship between independent and dependent variables. Hence, based on the past literature and aforementioned discussion, the present study intended to examine the moderating effects of Access to Finance and Competitive Environment on the Relationship between Human Capital, Knowledge Management, Market Orientation and SMEs Performance in Leather Industry of Pakistan". Keywords: Small medium enterprise, performance, access to finance, competitive environment

Are federal single audit reports of internal control weaknesses a useful tool for evaluating management? The case of charter schools

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Jean Ryberg Bradley ◽  
Dana A. Forgione ◽  
Joel E. Michalek
Keyword(s):  
Charter Schools ◽  
Executive Compensation ◽  
Internal Control ◽  
Boards Of Directors ◽  
Content Type ◽  
External Stakeholder ◽  
Wide Range ◽  
Internal Control Weaknesses ◽  
Single Audit ◽  
The Relationship

PurposeThe authors examine whether reports of internal control weaknesses (ICWs) under federal single audit (FSA) guidelines are a useful tool for evaluating non-profit (NP) management, using a unique nationwide sample of NP charter schools. While prior research focuses on external stakeholder reactions to reported ICWs, little if any research addresses the utility of these reports for internal users. The authors fill this gap in the literature, finding evidence suggesting that NP charter school decision-makers use internal control (IC) reports when setting executive compensation – awarding lower pay increases when deficiencies are reported.Design/methodology/approachThe authors regress executive compensation changes on reported ICWs and likely determinants of NP compensation, including organization size, growth, liquidity and management performance, using a sample of 173 school/year observations representing 113 unique schools for the years 2012–2015.FindingsThe authors find a negative relationship with executive pay increases subsequent to reports of initial and repeated IC deficiencies, indicating that lower than average pay increases are awarded subsequent to reports of ICWs.Research limitations/implicationsInterpretation of the authors' results is subject to several limitations, including the possibility of omitted variable bias and the authors' sample, though it comprises all available data for the sample period, and is relatively small and may be considered exploratory in nature. Further, charter schools represent a unique public/private partnership in the educational sector, and the results may not be generalizable to other NPs. Future research could explore the relationship between reported IC deficiencies and governance in other, broader NP sectors.Practical implicationsThe authors' findings are useful to NP organization boards of directors as they consider what factors to evaluate in their chief executive officer (CEO) compensation decisions. In addition to other criteria, inclusion of IC effectiveness in the CEO reward system is prudent, especially in today's environment of increasingly important information security and IC matters. The results suggest such information is being included. This previously undocumented use is also of particular value to regulators when weighing the costs and benefits of mandating single audits for smaller NPs, who are otherwise unlikely to obtain information on the organization's IC environment.Social implicationsThese findings may help inform the debate regarding NP charter schools, a fast-growing, economically significant and highly controversial sector in public education. Charters are predominantly funded by state and local taxes. As such, the quality of governance in NP charter schools is of interest to a wide range of stakeholders including parents, regulators and the public at large.Originality/valueWhile prior research on ICWs and NPs focuses on external stakeholder reactions to reported ICWs, little if any research addresses the utility of these reports for internal users, especially in relatively smaller organizations. The research leverages the existence of charter schools, which are independent but present nationwide, providing a suitable sample of like organizations. Further, no extant research to the authors' knowledge examines the relationship of NP executive compensation and reported ICWs – a topic previously addressed in the for-profit (FP) literature.

Does investment in innovation impact firm performance in emerging economies? An empirical investigation of the Indian food and agricultural manufacturing industry

2021 ◽  
Vol 13 (2) ◽  
pp. 233-248
Author(s):  
Manogna R.L. ◽  
Aswini Kumar Mishra
Keyword(s):  
Firm Performance ◽  
Manufacturing Industry ◽  
Emerging Market ◽  
Developed Countries ◽  
Emerging Economy ◽  
Content Type ◽  
Agricultural Industry ◽  
Indian Food ◽  
The Impact ◽  
The Relationship

Purpose The study aims to analyze the impact of Research & Development (R&D) intensity on the firm’s performance, measured by growth of sales in the emerging market like India. Innovation strategy and its outcomes for firms may be different in developing countries as compared to developed countries. Thus, a study that focuses on the emerging economy like India, with a majority of the population dependent on agriculture, is of prime importance to the firm performance in the food and agricultural manufacturing industry. For this study, the broader focus will be on one widely recognised factor which may influence the growth rate of firms, i.e. investment in innovations which is in terms of R&D expenditure. Design/methodology/approach The paper investigates the relationship between the R&D efforts and growth of firms in the Indian food and agricultural manufacturing industry during 2001–2019. To empirically test the relationship between firm’s growth (FG) and R&D investments, system generalised method of moments technique has been used, hence enabling to avoid problems related to endogeneity and simultaneity. Findings The findings reveal that investments in innovations have a positive effect on the growth of firms in the Indian food and agricultural manufacturing industry. Investment in R&D also enables the firms to reap benefits from externalities present in the industry. Further analysis reveals that younger firms grow faster when they invest in R&D. More specifically, this paper finds evidence in the case of the food and agricultural industry that import of raw materials negatively affects the FG and export intensity positively affects the growth in the case of R&D firms. Research limitations/implications This study suggests that the government should encourage the industries to invest optimally in R&D projects by providing favourable fiscal treatments and R&D subsidies which are observed to have positive effects in various developed countries. Originality/value To the best of the author’s knowledge, the current paper is the first to analyse the impact of innovation in food and agricultural industry on firm’s performance in an emerging economy context with the latest data. This paper agrees that a government initiative to increase private R&D expenditure would have favourable effects on FG as growing investments in R&D lead to further growth of the firms.

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