Abstract
Purpose: The purpose of this paper is to examine how executive pay schemes influence managerial efficiency, which the authors measure as the risk-adjusted firm performance. Design/methodology/approach: The authors utilized hierarchical regression to test the hypotheses. Findings: The authors find that as options constitute a higher percentage of total compensation packages, subsequent firm risk-adjusted performance declines. The authors also find an inverse relationship between TMT stock ownership and risk-adjusted performance. Research limitations/implications: The findings suggest that the firm stakeholders should reconsider the likely influence of option-based incentives and equity holdings on the risk-adjusted performance. Originality/value: Most executive compensation research focuses on either the pay-to-performance or pay-to-risk links. However, in this paper, the authors combine both the performance and risk dimensions simultaneously.
| Original language | English |
|---|---|
| Pages (from-to) | 187-205 |
| Number of pages | 19 |
| Journal | Journal of Strategy and Management |
| Volume | 10 |
| Issue number | 2 |
| DOIs | |
| Publication status | Published - 2017 |
| Externally published | Yes |
Keywords
- Agency theory
- Executive compensation
- Risk-adjusted performance
- Upper echelons
ASJC Scopus subject areas
- Business and International Management
- Strategy and Management