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Can Firms Create Value Through Excess Managerial Compensation? Evidence from Taiwan

Author

Listed:
  • Jinn-Yang Uang

    (Department of Accounting, Chinese Culture University, Taipei, Taiwan)

  • Ching-Wen Hu

    (Assurance Services, PricewaterhouseCoopers, Taipei)

Abstract

This study investigates the relationship between excess managerial compensation and subsequent firm performance as well as the influence of institutional ownership on this association. Using a sample of non-financial firms listed on the Taiwan Stock Exchange, this study reveals that excess pay negatively influences subsequent performance, suggesting that providing extra compensation to top managers may exacerbate agency problems. However, the adverse effect of excess compensation on firm performance is mitigated when firms have a higher proportion of institutional ownership.

Suggested Citation

  • Jinn-Yang Uang & Ching-Wen Hu, 2025. "Can Firms Create Value Through Excess Managerial Compensation? Evidence from Taiwan," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 75(1), pages 76-97, March.
    • Handle: RePEc:fau:fauart:v:75:y:2025:i:1:p:76-97
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    File URL: https://journal.fsv.cuni.cz/mag/article/show/id/1547
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    More about this item

    Keywords

    excess pay; managerial compensation; firm performance; institutional ownership; agency problem;
    All these keywords.

    JEL classification:

    • M12 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation

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