EXECUTIVE COMPENSATION AND FIRM PERFORMANCE: EVIDENCE FROM AN EMERGING COUNTRY

Yıl 2018, Cilt: 10 Sayı: 19, 231 - 242, 01.07.2018

Levent Ünal Aslı Aybars

https://doi.org/10.14784/marufacd.502127

Cited By: 1

Öz

Shareholders delegate daily operation to their agents
with the assumption that they would work totally for their benefit. However,
individual efforts of agents are not directly observable by the principal
(shareholders). To align the interests of agents and those of shareholders,
compensation schemes are based on either market or accounting measures (or a
combination of the two). This paper, using longitudinal data of 151 listed
Turkish firms over the years of 2006 to 2015, found that total compensation
amount paid to executives and directors is sensitive to both accounting and
market measures. It is revealed that current year net profit and lagged total
shareholder value created played important role in the determination of
compensation level of executives. The estimations revealed that TL 10,000
return provided to shareholders in the previous year caused TL 5 increase in
executives’ total compensation, whereas TL 2 of TL 1000 current year net profit
of the firms is given to the executives. It is believed that compensation
contracts which are sharing only a fraction of created shareholder value with
the agent cannot align the interests of both parties and fully mitigate the
agency problem.

Anahtar Kelimeler

Compensation, Agency theory, Performance measures

Kaynakça

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