Abstract
analysis fails to detect a positive pay–performance relationship. The finding questions the conventional wisdom that executive pay helps to align shareholder interests with those of managers. It is consistent with the view that powerful managers can influence their own pay. The results of the study suggest that other means of resolving agency problems and novel explanations of executive compensation may provide useful insights.
| Original language | English |
|---|---|
| Pages (from-to) | 45-60 |
| Number of pages | 16 |
| Journal | Journal of multinational financial management |
| Volume | 18 |
| Issue number | 1 |
| DOIs | |
| Publication status | Published - 2008 |
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Keywords
- METIS-276973
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Is the pay–performance relationship always positive? Evidence from the Netherlands. / Duffhues, P.; Kabir, Mohammed Rezaul.
In: Journal of multinational financial management, Vol. 18, No. 1, 2008, p. 45-60.Research output: Contribution to journal › Article › Academic › peer-review
TY - JOUR
T1 - Is the pay–performance relationship always positive?
T2 - Evidence from the Netherlands
AU - Duffhues, P.
AU - Kabir, Mohammed Rezaul
PY - 2008
Y1 - 2008
N2 - This study examines the widespread belief that executive pay should reflect firm performance.We compile a hand-collected data set of compensation paid to executive directors of Dutch listed companies and analyze if executive compensation is indeed determined by firm performance. A variety of accounting-based and capital market-based performance measures are used. The analysis also encompasses both contemporaneous and lagged relationships, and controls for firm, time and industry characteristics. Our robust empiricalanalysis fails to detect a positive pay–performance relationship. The finding questions the conventional wisdom that executive pay helps to align shareholder interests with those of managers. It is consistent with the view that powerful managers can influence their own pay. The results of the study suggest that other means of resolving agency problems and novel explanations of executive compensation may provide useful insights.
AB - This study examines the widespread belief that executive pay should reflect firm performance.We compile a hand-collected data set of compensation paid to executive directors of Dutch listed companies and analyze if executive compensation is indeed determined by firm performance. A variety of accounting-based and capital market-based performance measures are used. The analysis also encompasses both contemporaneous and lagged relationships, and controls for firm, time and industry characteristics. Our robust empiricalanalysis fails to detect a positive pay–performance relationship. The finding questions the conventional wisdom that executive pay helps to align shareholder interests with those of managers. It is consistent with the view that powerful managers can influence their own pay. The results of the study suggest that other means of resolving agency problems and novel explanations of executive compensation may provide useful insights.
KW - METIS-276973
U2 - 10.1016/j.mulfin.2007.02.004
DO - 10.1016/j.mulfin.2007.02.004
M3 - Article
VL - 18
SP - 45
EP - 60
JO - Journal of multinational financial management
JF - Journal of multinational financial management
SN - 1042-444X
IS - 1
ER -