Executive compensation, firm performance, earnings management and corporate governance.
Lee, Kin Wai.
Date of Issue2004
College of Business (Nanyang Business School)
This thesis contains two studies. In study one, I investigate whether dispersion of compensation among the top management team affects firm performance. As suggested by tournament theory, higher pay dispersion provides the incentives to motivate better organizational performance. In contrast, based on social and psychological considerations, equity-fairness theory suggests that greater pay dispersion reduces employees' effort, which translates to lower firm performance. Consistent with tournament theory, I find that firm performance is positively associated with the dispersion of compensation among the top management team. When within-firm interdependency is high, increasing dispersion of top management compensation reduces firm performance. Finally, large firms, high-growth and high technology firms have larger dispersion of compensation among the top management team.
Nanyang Technological University