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The Components Of Managerial Pay Adjustments And Their Impact On Firm Performance

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  • MING‐YUAN CHEN

Abstract

This paper examines the impact of managerial pay adjustments on firm performance using Taiwanese data. Pay adjustments are decomposed into three components: adjustments derived from external labor market comparisons, adjustments based on changes in firm and manager characteristics, and transitory adjustments. Panel regression models are used to test how pay adjustments affect subsequent firm performance. Evidence shows that the relation between pay adjustments and performance is related to performance measures, as different measures capture the incentive effect and managerial entrenchment effect in different ways. The relative strength of these two effects also explains the diverse impacts of the three adjustment components on firm performance.

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  • Ming‐Yuan Chen, 2010. "The Components Of Managerial Pay Adjustments And Their Impact On Firm Performance," Manchester School, University of Manchester, vol. 78(6), pages 582-608, December.
  • Handle: RePEc:bla:manchs:v:78:y:2010:i:6:p:582-608
    DOI: 10.1111/j.1467-9957.2009.02148.x
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