The Relationship between Financial Incentives for Company Presidents and Firm Performance in Japan

18 Pages Posted: 21 Nov 2008

Date Written: 2006-09-28

Abstract

Kaplan (1994) concludes that the relationship between top pay and stock performance in Japan is similar to that in the USA. Using a new and comprehensive data set that includes presidents stock and their stock option holdings, this study estimates the sensitivity of Japanese presidents wealth to shareholder wealth in the period 1977-2000. Contrary to the commonly held belief that Japanese corporate governance is becoming more like that in the USA, the results show that pay-performance sensitivity actually decreased substantially after 1990. In 2000, Japanese presidents received $US22,100 when stock returns increased from -2.1% to 14.8%.

JEL Classification: G30, J33, M52

Suggested Citation

Kubo, Katsuyuki and Saito, Takuji, The Relationship between Financial Incentives for Company Presidents and Firm Performance in Japan (2006-09-28). Japanese Economic Review, Vol. 59, Issue 4, pp. 401-418, December 2008. Available at SSRN: https://ssrn.com/abstract=1303761 or http://dx.doi.org/10.1111/j.1468-5876.2008.00420.x

Katsuyuki Kubo (Contact Author)

Waseda University ( email )

1-104 Totsukamachi, Shinjuku-ku
Shinjuku-ku, Tokyo 169-8050, 169-8050
Japan

Takuji Saito

Waseda University ( email )

Okhubo Campus, Shinjuku-ku, Room 59-416B
Tokyo, Tokyo 169-8555
Togo

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