| Summary: | 碩士 === 真理大學 === 管理科學研究所 === 92 === The purpose of this study is to examine the relationship between CEO compensation and firm performance. According to Agency Theory, the agency conflicts exist because the separation of ownership and control in a firm. In other word, interests between stockholders and CEO are different. And the difference will bring the agency conflicts. Therefore, one way to avoid agency problems would be to reward executives on the basis of finance returns.
According to resource-based theory, CEO is the most important human resources in the firm, and can create or sustain competitive advantages. So CEO is a key for firm performance and compensation is a tool to make CEO hard-working for firm performance.
In Taiwan, studies about the relationship between CEO compensation and performance are very scanty. So this study used simultaneous equations to examine the relationship between CEO compensation and firm performance in 442 electronic industries in Taiwan over the years 1995-2002. And distributed CEO compensation in to cash and stock, and used ROE and Tobin''s Q to represent firm performance.
The results support the arguments that (1) there exist significant feedback effect between CEO compensation and firm performance, and (2) compensation can reduce agency conflicts between stockholders and CEO, and (3) high firm performance can help CEO to win more compensation.
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