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The Influence Of Management Compensation On Diversification Strategy

Author

Listed:
  • Tzu-Ching Weng
  • Chieh-wen kuo Chem
  • Pei-Jung Lee

Abstract

The main purpose of this study is to examine the effects of managerial compensation on corporate diversification strategy. Managerial compensation is not only related to personal income but also closely linked to the firm’s equity and long-term development strategies. In the pursuit of self-interest by the principal and the agent, both parties seek to maximize their benefits. Previous studies have indicated that related diversification is better for resource sharing and synergy, leading to a category economy. This study uses valid sample observations to analyze narrative statistics, and then uses ordinary least square linear regression analysis. This leads to the following conclusions: First, the compensation system for manager rights and interests is positively correlated with the overall degree of diversification. Second, the system of cash compensation for managers is relatively irrelevant to the overall degree of diversification. Third, the size of the company is positively correlated with the degree of overall diversification.

Suggested Citation

  • Tzu-Ching Weng & Chieh-wen kuo Chem & Pei-Jung Lee, 2022. "The Influence Of Management Compensation On Diversification Strategy," Global Journal of Business Research, The Institute for Business and Finance Research, vol. 16(1), pages 17-40.
    • Handle: RePEc:ibf:gjbres:v:16:y:2022:i:1:p:17-40
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    More about this item

    Keywords

    Management Compensation; Corporate Diversification Strategy;

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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