Executive Compensation: Performance, Complexity or Supply and Demand?

Abstract

In this study we shed new light on the structure of executive compensations. Previous studies on this subject have found weak relationships between market performance variables and executive compensations. In this study, we re8peoify the traditional models to include effects of complexity of firms and a proxy variable to determine the supply-demand structure of the industry. While this specification, we found that both performance, measured by return on equity (ROB), and the structure of the market, measured by price/book ratio, significantly influenc.e managerial compensations. The same was not true for the complexity variable. (G30, G32)