Firm performance, corporate governance and executive compensation in high-tech businesses

摘要

Most previous researchers believe that the connection between executive compensation and company performance will resolve agency problems between the principal and the agent. However, this method will lead to an unlimited increase in agency costs and make executives pay attention to only short-term company performance, therefore ignoring long-term growth. Thus, this research includes firm performance and two other mechanisms, institutional investors and boards directors, to assess the impact of these on executive compensation. The samples used in this study were listed companies in high-tech businesses during 2004-2006. This article's conclusion is as follows: (1) executive compensation as a control mechanism to reduce the agency problem is applied efficiently to high-tech businesses; (2) executive compensation will be lower when institutional investors' control is relatively effective. This explains the substitutive characteristic between pay-for-performance and control mechanisms from corporate governance.