Corporate Governance, Top Executive Compensation and Firm Performance in Japan

Posted: 26 Apr 2014

See all articles by Sudipta Basu

Sudipta Basu

Temple University - Department of Accounting

Lee-Seok Hwang

Seoul National University - College of Business Administration

Toshi

Independent

Joseph Weintrop

City University of New York - Baruch College - Stan Ross Department of Accountancy

Date Written: January 2007

Abstract

For 174 large Japanese corporations during 1992-1996, we find that top executive pay is higher in firms with weaker corporate governance mechanisms, controlling for standard economic determinants of pay. We use management ownership and family control (“the ownership mechanisms”), and keiretsu affiliation, the presence of outside directors, and board size (“the monitoring mechanisms”) to measure corporate governance mechanisms. We also find that the excess pay related to ownership and monitoring variables is negatively associated with subsequent accounting performance, consistent with the presence of an agency problem. We do not, however, find an association between this excess pay and subsequent stock returns.

Keywords: Main bank; Managerial opportunism; Family control

JEL Classification: G32; G34; J33

Suggested Citation

Basu, Sudipta and Hwang, Lee-Seok and Mitsudome, Toshiaki and Weintrop, Joseph, Corporate Governance, Top Executive Compensation and Firm Performance in Japan (January 2007). Pacific-Basin Finance Journal, Vol. 15, No. 1, 2007. Available at SSRN: https://ssrn.com/abstract=2429013

Sudipta Basu (Contact Author)

Temple University - Department of Accounting ( email )

Philadelphia, PA 19122
United States
215.204.0489 (Phone)
215.204.5587 (Fax)

Lee-Seok Hwang

Seoul National University - College of Business Administration ( email )

Seoul, 151-742
Korea, Republic of (South Korea)

Toshiaki Mitsudome

Independent ( email )

Joseph Weintrop

City University of New York - Baruch College - Stan Ross Department of Accountancy ( email )

One Bernard Baruch Way, Box B12-225
New York, NY 10010
United States
212-802-6443 (Phone)
212-802-6423 (Fax)

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