Premium
Directors are Rewarded for Past Failure and Future Success
Author(s) -
Ting* HsiuI
Publication year - 2013
Publication title -
asia‐pacific journal of financial studies
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.375
H-Index - 15
eISSN - 2041-6156
pISSN - 2041-9945
DOI - 10.1111/ajfs.12011
Subject(s) - earnings , business , compensation (psychology) , human capital , panel data , accounting , economics , psychology , econometrics , economic growth , psychoanalysis
The compensation of boards of directors and supervisors is higher in firms with lower earnings, than that of boards of directors and supervisors in corresponding industries with higher earnings. Using firm‐level panel data of T aiwan S tock E xchange listed firms over the period 1999–2008, this study investigates the reasons for this phenomenon of rewarding failure. The result provides evidence that rewarding failure is due to an asymmetric reward scheme and human capital retention, and it encourages the board to make aggressive decisions.