TITLE:
The Effect of Ownership Structure and Board Characteristics on Excessive Compensation of Top-Level Management
AUTHORS:
Jhen-Siou Liou, Chia-Chi Lee, Jen-Ten Liu
KEYWORDS:
Ownership Structure, Board Characteristics, Excessive Compensation
JOURNAL NAME:
Journal of Mathematical Finance,
Vol.14 No.1,
February
19,
2024
ABSTRACT: This
study explored the impact of ownership structure and board characteristics on
executive excessive compensation in Taiwan-listed companies from 2012 to
2021. Regarding ownership structure, the research findings indicate that
managerial ownership, institutional ownership, and ownership deviation from
earnings are significantly positively related to executive excessive
compensation. This suggests that top managers may be motivated by self-interest
to receive excessive compensation, while institutional shareholders tend to
provide higher compensation to incentivize top-level management. Moreover, when
company ownership is concentrated among a few controlling shareholders, agency
problems become more severe, leading to higher executive excessive compensation.
Additionally, large shareholders’ and
board directors’ ownership percentages showed a significant negative relationship with
executive excessive compensation. This indicates that higher ownership
percentages by large shareholders and board directors enhance their monitoring
effectiveness, restraining excessive compensation for top-level management.
Regarding board characteristics, empirical results show that board size, the
busyness of independent directors, and the frequency of compensation committee
meetings are significantly positively associated with executive excessive
compensation. Larger board sizes and the busyness of independent directors reflect poorer corporate governance,
enabling top-level executives to obtain higher levels of excessive
compensation. In contrast, a higher frequency of compensation committee
meetings suggests greater engagement of committee members. This can lead to
better operational performance of companies and increased executive excessive
compensation.