Executive Compensation, Firm Performance and Corporate Governance: An Empirical Analysis
35 Pages Posted: 8 Feb 2006
Date Written: January 2006
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
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