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- Title
Executive Pay and Market Value Sensitivity.
- Authors
Feng-Li Lin
- Abstract
Executive pay relative to that of average workers has risen dramatically worldwide. Such a high level of executive pay raises the question of whether a steep rise in executive pay affects firm value. This study examined the relationship between executive pay and firm value. A panel smooth transition regression model is adopted to determine an optimal level of executive pay that maximizes firm value for a sample of 512 Taiwanese-listed firms over the period 2006-2011. The finding is that when the ratio of executive pay to net income after tax exceeds 2.71%, the firm value increases. The results suggest a correlation between large executive ownership (corresponding to high executive pay) and both increased operational efficiencies and firm value. These findings may be useful when contemplating executive compensation policy.
- Subjects
EXECUTIVE compensation; MARKET value; EMPLOYEES; ENTERPRISE value; PANEL analysis
- Publication
Panoeconomicus, 2016, Vol 63, Issue 4, p411
- ISSN
1452-595X
- Publication type
Article
- DOI
10.2298/PAN1604411L