A Study on the Association Between Top Executive Compensation and the Negative Earnings

• Main Authors: Jui-Tsun Wu, 吳瑞純
• Other Authors: Liu-Ching Tsai
• Format: Others
• Language: zh-TW
• Published: 2006
• Online Access: http://ndltd.ncl.edu.tw/handle/61544434456452600635

碩士 === 國立嘉義大學 === 管理研究所 === 94 === Prior studies in Taiwan about the executive compensation often focus on the association between the design of the arrangements and the performance. But the executive compensation arrangements design is not only affected by these results. The companies in Taiwan are closely related to their concentrated family ownership. Under the system of separating between ownership and management, it contends that entrenched managers may influence their own pay arrangements to favor themselves by hiring relevant people and affiliation companies to serve as trustees to influence on the compensation committees. The purpose of this study is to investigate whether the shielding executive annual pay from losses reflects managerial entrenchment. Taiwanese listed firms in 2003 were used as the sample. We find that the coefficient of Neg_ROE, is an estimation of the difference between the weight of negative earnings and the weight of positive earnings is significantly negative. These results imply that the negative earnings components receive less weight in executive pay. In addition, the monitoring mechanisms reduce the degree of shielding, and managerial influence increases the degree of shielding. Overall, these findings are consistent with the hypothesis that entrenched managers influence their compensation arrangements to favor themselves at the expense of shareholders. These findings contribute to the existing literature by providing evidence that shielding reflects managerial entrenchment.