Outside directors' equity incentives and strategic alliance decisions |
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| Institution: | 1. National Chengchi University, Taipei 116, Taiwan;2. Soochow University, Taipei 100, Taiwan;1. Ivey Business School, Western University, 1255 Western Road, London, ON N6G0N1, Canada;2. Gustavson School of Business, University of Victoria, 3800 Finnerty Road, Victoria, BC V8P5C2, Canada;1. Tilburg University, Netherlands;2. Nova School of Business and Economics, Portugal;1. Sabancı University, Sabancı Business School, Turkey;2. University of Maryland, Robert H. Smith School of Business, United States of America;3. Koc University, College of Administrative Sciences and Economics, Turkey;1. Business School, University of Bristol, UK;2. School of Accounting, Guangdong University of Foreign Studies, Guangzhou, China;3. Research Center for Accounting and Economic Development of Guangdong-Hong Kong-Macao Greater Bay Area, Guangzhou, China;1. School of Economics and Finance, Xi''an Jiaotong University, Xi''an, Shaanxi 710061, PR China;2. The Center for Economic Research, Shandong University, Ji''nan, Shandong 250100, PR China;3. School of Economics, Central University of Finance and Economics, Beijing 102206, PR China |
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| Abstract: | This study examines whether the proportion of equity-based compensation in outside director compensation is associated with corporate strategic alliances. We hypothesize that equity incentives provided to outside directors mitigate potential agency conflicts between outside directors and shareholders that arise from the strategic alliance decision-making process, thus resulting in more alliance activities. Our empirical evidence indicates that the percentage of equity in outside director compensation is positively associated with the incidence and the number of strategic alliance activities. Additionally, when the proportion of outside directors' equity in total compensation is higher, firms with strategic alliances generate better future stock returns. Overall, our findings suggest that providing equity incentives in outside director compensation mitigates the agency problems inherent in corporate strategic alliance decisions and enhances the quality of alliance activities. |
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