Premium
THE COMPONENTS OF MANAGERIAL PAY ADJUSTMENTS AND THEIR IMPACT ON FIRM PERFORMANCE
Author(s) -
CHEN MINGYUAN
Publication year - 2010
Publication title -
the manchester school
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.361
H-Index - 42
eISSN - 1467-9957
pISSN - 1463-6786
DOI - 10.1111/j.1467-9957.2009.02148.x
Subject(s) - incentive , economics , panel data , affect (linguistics) , microeconomics , pay for performance , performance related pay , econometrics , industrial organization , business , linguistics , philosophy
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.