Corporate Governance, Top Executive Compensation and Firm Performance in Japan
Posted: 26 Apr 2014
Date Written: January 2007
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: Suggested Citation