Executive Compensation and Deployment of Corporate Resources: Evidence from Working Capital

43 Pages Posted: 10 Oct 2015 Last revised: 13 Jul 2017

See all articles by Nihat Aktas

Nihat Aktas

WHU - Otto Beisheim School of Management

Ettore Croci

Catholic University of the Sacred Heart of Milan

Oguzhan Ozbas

University of Southern California - Marshall School of Business - Finance and Business Economics Department

Dimitris Petmezas

University of Surrey - Surrey Business School

Date Written: July 10, 2017

Abstract

Firms provide compensation incentives to executives, primarily in the form of bonus payments, to alleviate slack in the deployment of corporate resources to working capital. Financially constrained firms are heavy users of working capital incentives. So are firms that are less exposed to external takeover threats. Among the different components of working capital, inventories and payables are the main drivers of executive bonuses. Overall, our evidence supports the optimal contracting view of bonus payments in executive compensation.

Keywords: working capital, executive compensation, bonus, financial constraint, takeover threat

JEL Classification: G30, J33

Suggested Citation

Aktas, Nihat and Croci, Ettore and Ozbas, Oguzhan and Petmezas, Dimitris, Executive Compensation and Deployment of Corporate Resources: Evidence from Working Capital (July 10, 2017). Paris December 2015 Finance Meeting EUROFIDAI - AFFI. Available at SSRN: https://ssrn.com/abstract=2671304 or http://dx.doi.org/10.2139/ssrn.2671304

Nihat Aktas (Contact Author)

WHU - Otto Beisheim School of Management ( email )

Burgplatz 2
Vallendar, 56179
Germany

Ettore Croci

Catholic University of the Sacred Heart of Milan ( email )

Largo Gemelli, 1
Via Necchi 9
Milan, MI 20123
Italy

Oguzhan Ozbas

University of Southern California - Marshall School of Business - Finance and Business Economics Department ( email )

Marshall School of Business
Los Angeles, CA 90089
United States
213-740-0781 (Phone)
213-740-6650 (Fax)

Dimitris Petmezas

University of Surrey - Surrey Business School ( email )

Guildford, Surrey GU2 7XH
United Kingdom

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