Executive Compensation, Firm Performance and Corporate Governance: An Empirical Analysis

35 Pages Posted: 8 Feb 2006

See all articles by Aditya Parthasarathy

Aditya Parthasarathy

Indian Institute of Management Calcutta

Debashish Bhattacherjee

Indian Institute of Management Calcutta - Human Resource Management

Krishnakumar Menon

Indian Institute of Management Calcutta

Date Written: January 2006

Abstract

This paper investigates the determinants of executive compensation using the most recent data on firm performance, corporate governance and managerial compensation for a large sample of Indian firms. A linear regression model is used to develop explanations for total CEO compensation and the proportion of incentive pay that forms a part of the CEO's compensation. It is found that firm size is a significant determinant of both these aspects of CEO compensation. The results also show that CEOs who are promoters of their firms earn significantly more than ordinary CEOs. Such individuals also earn a much larger component of their compensation as incentive pay. In addition, this study also quantifies the significant divergences in compensation policies that are followed at firms in the public sector when compared to private sector firms.

Keywords: Executive Compensation, Corporate Governance, Firm Performance

JEL Classification: J33, G30, L25

Suggested Citation

Parthasarathy, Aditya and Bhattacherjee, Debashish and Menon, Krishnakumar, Executive Compensation, Firm Performance and Corporate Governance: An Empirical Analysis (January 2006). Available at SSRN: https://ssrn.com/abstract=881730 or http://dx.doi.org/10.2139/ssrn.881730

Aditya Parthasarathy (Contact Author)

Indian Institute of Management Calcutta ( email )

E-110, NTB
Joka, Diamond Harbour Road
Calcutta, West Bengal 700104
India

Debashish Bhattacherjee

Indian Institute of Management Calcutta - Human Resource Management ( email )

E-110, NTB
Joka, Diamond Harbour Road
Calcutta, West Bengal 700104
India

Krishnakumar Menon

Indian Institute of Management Calcutta ( email )

E-110, NTB
Joka, Diamond Harbour Road
Calcutta, West Bengal 700104
India

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