Remuneration Committees, Executive Remuneration, and Firm Performance in Indonesia

Heliyon 6, 2020

DOI: 10.1016/j.heliyon.2020.e03452

11 Pages Posted: 24 Apr 2020

See all articles by Iman Harymawan

Iman Harymawan

Universitas Airlangga

Dian Agustia

affiliation not provided to SSRN

Mohammad Nasih

affiliation not provided to SSRN

Azmi Inayati

Airlangga University

John Nowland

City University of Hong Kong

Date Written: 2020

Abstract

Indonesia is currently in the process of mandating the establishment of Remuneration Committees (RCs) for all listed companies. However, little is known about the effectiveness of RCs in Indonesia. This study sheds light on this issue, by examining the relationships between RCs, executive and board of director remuneration, and firm performance in Indonesia. This study uses 847 observations of firms listed on the Indonesian Stock Exchange (IDX) during 2014–2017. Our results indicate that RCs are positively related to executives remuneration and firm performance. In particular, higher remuneration is only linked to higher performance in firms that have established a remuneration committee. This study documents the interactions between RCs, remuneration levels of senior company officers and firm performance in an emerging market setting with voluntary formation of RCs. This study has implications for regulators and company management in Indonesia (and other emerging markets), as the existence of remuneration committees is found to be associated with more effective remuneration packages and higher firm performance.

Keywords: Business, Remuneration Committee, Remuneration, Firm Performance

Suggested Citation

Harymawan, Iman and Agustia, Dian and Nasih, Mohammad and Inayati, Azmi and Nowland, John, Remuneration Committees, Executive Remuneration, and Firm Performance in Indonesia (2020). Heliyon 6, 2020, DOI: 10.1016/j.heliyon.2020.e03452, Available at SSRN: https://ssrn.com/abstract=3562009

Iman Harymawan (Contact Author)

Universitas Airlangga ( email )

JL. Airlangga no 4
Surabaya, East Java 60286
Indonesia

HOME PAGE: http://www.feb.unair.ac.id

Dian Agustia

affiliation not provided to SSRN

Mohammad Nasih

affiliation not provided to SSRN

Azmi Inayati

Airlangga University ( email )

Jl. Darmawangsa Dalam 2
Surabaya, 60286
Indonesia

John Nowland

City University of Hong Kong ( email )

83 Tat Chee Avenue
Kowloon
Hong Kong
China

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