| Summary: | 碩士 === 淡江大學 === 會計學系碩士班 === 100 === This paper investigates the relationship between firm’s performance and its top managers’ compensation, and research whether firm’s risks affect the relationship between firm’s performance and its top managers’ compensation or not, and we divide firm’s performance ROA and stock returns; separate firm’s risks operating risk, credit risk, market risk, and moral risk.
The empirical results of this paper are listed as follow:
First of all, the empirical result shows that top managers’ compensation is significantly positively correlated with firm’s performance. Moreover, it also reveals that Taiwanese firms have no cap (upper bound) to their top managers’ compensation, but they have bogey (lower bound), and this result is inconsistent with Shaw and Zhang (2010) study. Additionally, we find that firms with higher credit risk have lower pay-for-performance sensitivity, indicating firms use pay-for-performance sensitivity to adapt firm credit risk. Nevertheless, when market risk gets higher, pay-for-compensation sensitivity becomes higher, revealing firm would compensate top managers’ risk premium. Finally, we separate moral risk stock divergence, board divergence, and top managers’ share-holding rate. On earnings-based measure, the higher divergence is, the higher pay-for-performance sensitivity is; however, on market-based measure, the higher divergence is, the lower pay-for-performance sensitivity is. Furthermore, we find that pay-for- performance sensitivity is not affected by top managers’ share-holding rate, but the relation between top managers’ share-holding rate and total compensation is positive.
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