Skip to main content

Research Repository

Advanced Search

Managerial compensation and firm performance: The moderating role of managerial ownership and other governance factors

Adelopo, Ismail; Adu‐Ameyaw, Emmanuel; Cheung, Kwok Yip; Bako, Hajara Santali

Managerial compensation and firm performance: The moderating role of managerial ownership and other governance factors Thumbnail


Authors

Ismail Adelopo Ismail.Adelopo@uwe.ac.uk
Professor in Accounting and Finance

Emmanuel Adu‐Ameyaw

Kwok Yip Cheung

Hajara Santali Bako



Abstract

This study looks at how executive compensation affects firm value and the extent to which this relationship is sensitive to managerial ownership and corporate governance factors. We use data from UK FTSE 100 firms for the period 2007–2012, generating a total of 578 firm-year observations. Consistent with optimal compensation theory, we find that the managerial compensation –firm value is more sensitive to executives’ ownership levels and other corporate governance indicators. Our results remain robust to alternative econometric models. We contribute to the literature on corporate governance and firm value. While the paper builds on the executive bonus compensation literature, it also furthers our understanding on the extent to which managerial ownership, institutional ownership, board size and non-executive ownership matter in the executive bonus compensation—corporate value relationship with specific emphasis on UK FTSE 100 firms. Our second contribution is related to the moderating role of managerial (executive) ownership. We show that as executives residual interests go up, managers become more conscious of the firm's idiosyncratic risk, and hence lessen their aggressive investment and financing strategies culminating in lower firm value.

Journal Article Type Article
Acceptance Date Dec 10, 2022
Online Publication Date Jan 3, 2023
Publication Date Jul 31, 2023
Deposit Date Jan 30, 2023
Publicly Available Date Jan 4, 2024
Journal Journal of Corporate Accounting and Finance
Print ISSN 1044-8136
Electronic ISSN 1097-0053
Publisher Wiley
Peer Reviewed Peer Reviewed
Volume 34
Issue 3
Pages 31-46
DOI https://doi.org/10.1002/jcaf.22609
Keywords Managerial compensation; firm performance; ownership
Public URL https://uwe-repository.worktribe.com/output/10395196
Publisher URL https://onlinelibrary.wiley.com/doi/abs/10.1002/jcaf.22609

Files






You might also like



Downloadable Citations