Executive compensation, firm performance, and Chaebols in Korea: Evidence from new panel data

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. This paper provides the first rigorous econometric estimates on the pay-performance relations for executives of Korean firms with and without Chaebol affiliation. To do so, we have assembled for the first time panel data (that provide information not only on executive compensation and firm performance but also on Chaebol affiliation) for 246 firms that were included in KOSPI200 for at least two consecutive years from 1998 to 2001. Contrary to a popular belief that Korean corporate governance and the structure of Korean executive compensation is considerably different from elsewhere in the West, we find that cash compensation of Korean executives is statistically significantly related to stock market performance and that the magnitude of the sensitivity of pay to stock market performance is comparable to the U.S. and Japan. Perhaps even more importantly, further analysis reveals for the first time that such overall significant executive pay-performance link is driven by nonChaebol firms and that no such link exists for Chaebol firms. The evidence is consistent with the recent literature on the nature of Chaebols in Korea and the current corporate governance reform efforts in Korea that are aimed mostly at Chaebol firms. Terms of use: Documents in D I S C U S S I O N P A P E R S E R I E SJEL Classification: M52, M12, G30, G15, J33, O53

The relationship between remuneration and financial performance for companies listed on the Johannesburg Stock Exchange

“…However, the results are in line with the results of Bussin and Blair (2015), Conyon (1997), Conyon et al (2000), Coughlan and Schmidt (1985), Fatemi et al (2003), Gabaix and Landier (2008), Kato et al (2007), Masson (1971), Murphy (1985) and Scholtz and Smit (2013). The link between executive director remuneration and share performance may be an indication that remuneration policies are based on the share price (or market capitalisation) and is thus directly connected to the principle of shareholder wealth maximisation.…”

Executive Compensation: A Survey of Theory and Evidence

“…While the U.S. has required detailed disclosure of executive pay since the 1930s, most other countries have historically required at most the disclosure of aggregate cash compensation for all top executives combined, with no individual data and little information on other pay components . For most countries, this forced researchers to rely on industry surveys (Abowd and Boggano, 1995;Abowd and Kaplan, 1999;Murphy, 1999;Kato and Kubo, 2006;Thomas, 2009;Fabbri and Marin, 2015), to focus on only the cash component of pay (Kato and Rockel, 1992;Conyon and Schwalbach, 2000;Kato and Long, 2006;Kato, Kim, and Lee, 2007), or to examine the combined pay of the entire management team (Kaplan, 1994;Elson and Goldberg, 2003;Bryan, Nash, and Patel, 2006;Muslu, 2010). Notable exceptions with better disclosure are Canada and the U.K., which have required detailed pay disclosures since 1993 and 1995, respectively.…”

Corporate governance and national institutions: A review and emerging research agenda

“…This extends our understanding of the governance roles of executive compensation beyond the confines of agency framework. Research in other Asian countries have also shown stakeholder influence on executive pay in South Korea (Kato, Kim, & Lee, 2005) or the importance of relationship and network influences in China (Firth, Fung, & Rui, 2006;Kato & Long, 2006), even despite newer elements of ''stock market capitalism'' after the Chinese economic reforms. Buck, Liu & Skovoroda (2008: 4) suggest that "Chinese institutions (including culture as an informal institution) may have inhibited the adoption of long-term incentives in the form of equity-based pay, and thus reduced the responsiveness of pay to share price performance.…”