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Management Financial Incentives and Firm Performance in a Sustainable Development Framework: Empirical Evidence from European Companies

Author

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  • Gratiela Georgiana Noja

    (Department of Marketing and International Economic Relations, Faculty of Economics and Business Administration, West University of Timisoara, 16 Pestalozzi Street, 300115 Timisoara, Romania)

  • Mirela Cristea

    (Department of Finance, Banking and Economic Analysis, Faculty of Economics and Business Administration, University of Craiova, Center for Banking and Financial Research, 13 A I Cuza Street, 200585 Craiova, Romania)

  • Cecilia Nicoleta Jurcut

    (Department of Management, Faculty of Economics and Business Administration, West University of Timisoara, 16 Pestalozzi Street, 300115 Timisoara, Romania)

  • Alexandru Buglea

    (Department of Management, Faculty of Economics and Business Administration, West University of Timisoara, 16 Pestalozzi Street, 300115 Timisoara, Romania)

  • Ion Lala Popa

    (Department of Management, Faculty of Economics and Business Administration, West University of Timisoara, 16 Pestalozzi Street, 300115 Timisoara, Romania)

Abstract

Management financial incentives are an effective way to attract, retain and stimulate managers with beneficial spillover effects on firm performance. This paper explores the relationship between board and executive management compensation and remunerations and the financial performance of European companies from various industries in a sustainable development framework. The sample covers 1594 firms with data extracted from Thomson Reuters Eikon (Refinitiv, New York, NY, USA) databases from 2019 and a selection of specific indicators. The complex methodological endeavor encompassed by our research embeds several robust and two-stage least squares (2SLS/IV) regression models, structural equation modelling, including latent class analysis and network analysis through Gaussian Graphical Models. Main results bring to the fore that management financial incentives/packages reverberate positively and significantly on the performance of European firms, leading to important upwards in enterprise value and company earnings. Moreover, the sustainability indicators (committee, policy, energy use, renewable energies) also have positive effects on the financial performance of analyzed companies, being discussed extensively within the paper.

Suggested Citation

  • Gratiela Georgiana Noja & Mirela Cristea & Cecilia Nicoleta Jurcut & Alexandru Buglea & Ion Lala Popa, 2020. "Management Financial Incentives and Firm Performance in a Sustainable Development Framework: Empirical Evidence from European Companies," Sustainability, MDPI, vol. 12(18), pages 1-22, September.
    • Handle: RePEc:gam:jsusta:v:12:y:2020:i:18:p:7247-:d:408805
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