Executive Pay Matters: Looking Beyond the CEO to Explore Implications of Pay Disparity on Non‐CEO Executive Turnover and Firm Performance

Using a longitudinal data set covering a span of 10 years, we investigate the impact of vertical and horizontal pay disparity on non‐CEO executive turnover and subsequent firm performance. Hypothesizing differential responses to pay disparity depending on a non‐CEO executive's responsibilities, we first categorize non‐CEO executives based on their job demands and their role in the organization (e.g., oversight, divisional). We then explore how pay disparity influences the relationship between executive category and turnover, and how the level of pay disparity impacts the relationship between turnover and firm performance. We find that executive category significantly impacts the likelihood of turnover, and also influences firm performance. Theoretical and practical implications are discussed. © 2015 Wiley Periodicals, Inc.     

Pay Dispersion and Organizational Performance in Korea: Curvilinearity and the Moderating Role of Congruence with Organizational Culture

This study examines the curvilinear relationship between pay dispersion and organizational performance. According to the pay dispersion literature, a large pay gap has benefits and drawbacks for organizational performance because employees can feel motivated or demotivated depending on the degree of pay dispersion. We investigate the possibility of nonlinearity in the context of these countervailing forces, and aim to uncover the condition under which the positive effect of high pay dispersion prevails. Our empirical analysis of data from 436 Korean cross-industry firms shows that pay dispersion and organizational performance have an inverted U-shaped relationship. Moreover, when a pay scheme matches current organizational culture, the positive relationship between pay dispersion and organizational performance is more pronounced. We discuss the implications for future compensation research and practice.     

Opposition to unions in the non-union sector in Britain

Using data collected from over 1,000 individuals in 30 Finnish personnel funds, we study the links between pay knowledge, pay satisfaction and pay effectiveness. We find consistent evidence that higher levels of pay knowledge are associated with improved pay satisfaction and perceived pay effectiveness at the organizational level. We find that pay knowledge has an independent impact on organizational outcomes, rather than being mediated through pay satisfaction. Finally, comparing measures of actual pay knowledge and perceived pay knowledge, we find that the measures of actual knowledge were better connected to the outcomes. This last result suggests that to reliably estimate the relationship between pay knowledge and pay effectiveness researchers should prefer measures of actual knowledge.     

Pay dispersion among the top management team and outside directors: Its impact on firm risk and firm performance

Two key groups central to improving firm performance are the top management team (TMT) and the board of directors. Executives undertake strategic actions, whereas board members fulfill their resource provision and monitoring roles. Drawing on tournament theory and equity theory, we propose that high pay dispersion among outside directors and the TMT is positively associated with strategic risk, whereas high (low) TMT pay dispersion and low (high) outside director pay dispersion are positively associated with firm performance. Our predictor is the unexplained component of horizontal pay dispersion, or the residual of pay dispersion resulting from regressing pay on observable firm, industry, period, and individual characteristics. Our results highlight the importance of unexplained pay dispersion for TMTs, but not for boards of directors, in improving firm performance.     

The Relationship between Slack Resources and the Performance of Entrepreneurial Firms: The Role of Venture Capital and Angel Investors

In this study, we seek to further delineate factors that condition the relationship between slack resources and firm performance. To do so, we develop and test a model that establishes the role of venture capital (VC) and angel investors as powerful external stakeholders who positively moderate the slack–performance relationship. In addition, we provide more insight into this relationship by examining differences between these two types of private investors and by examining the role of their ownership stakes. We test our hypotheses using a sample of 1215 private firms, including VC‐backed firms, angel‐backed firms, and similar firms without such investors. We find that the presence of VC investors positively moderates the relationship between both financial and human slack resources and firm performance, while angel investors only positively moderate the effect of human resource slack. Further, VC investors are only marginally better at helping entrepreneurs to extract value from human resource slack than angel investors and they are no better when it comes to financial slack. Finally, we find that the impact of financial and human resource slack on firm performance is more positive in VC‐backed firms when investors hold high ownership stakes, an effect which is significantly stronger than when angel investors hold high ownership stakes.     

CEO Stock‐Based Incentive Compensation and Firm Performance: A Quantile Regression Approach

This study employs the quantile regression model to examine the non‐monotonic impact of CEO stock‐based compensation on firm performance, using the data for U.S. non‐financial firms from 1993 to 2005. The results indicate that while the impact of CEO stock‐based pay on firm performance is positive for firms in the higher earnings quantile levels, the impact is negative for firms in the lower levels. In addition, the “V‐shaped” relationship between CEO stock‐based pay and firm performance satisfactorily explains the longstanding disagreement among earlier studies with regard to whether CEO stock‐based pay can enhance firm performance. Furthermore, the quantile‐varying pattern of the impact of stock‐based compensation on firm performance is robust after controlling for the industrial and yearly effects. It is also robust to the use of the pay‐for‐performance sensitivity as an alternative explanatory variable or the market‐based measure of performance as the dependent variable, or the consideration of the suspected endogenous problem between firm performance and stock‐based compensation.     

The more,the merrier: Performance effects of cash over the business cycle

This paper adds to the recent interest in the link between cash and firm performance, by studying how this relationship varies across boom- and bust cycles. We use data of Norwegian firms from a broad range of sectors in the period 2005–2015, and both replicate and extend previous findings on the relationship between cash and performance over the business cycle. We find that i) cash has a positive, but weakly diminishing effect on operational firm performance (ROA) throughout the entire sample period, and ii) that the curvilinear relationship between cash and firm performance is the most pronounced in the pre-recession years, while it is virtually linearly positive in recessions and post-recession periods. We conclude that cash indeed has an impact on firms’ operational performance, and especially so in recessionary times.     

Strategic integration of HRM and firm performance in a changing environment in China: the impact of organisational effectiveness as a mediator

In the context of dramatic changes in China, this paper investigates the role of organisational effectiveness as a mediator in the relationship between the strategic integration of human resource management (HRM) and firm financial performance. Our study is based on the survey responses of 618 managers in state-owned and private (domestic and foreign-invested) enterprises in China. While most studies of the linkage between HRM practices and firm performance in China have measured firm financial performance or used an ad hoc combination of financial and non-financial indicators, we argue for a distinction to be made between non-financial organisational effectiveness and financial performance. As hypothesised, controlling for sector (state-owned vs. private), we find positive relationships between perceived changing business environment and strategic integration of HRM, and between strategic integration of HRM and organisational effectiveness. Our research adds an important conceptual link by showing that organisational effectiveness plays an important role as a mediator in the HRM and firm financial performance relationship and reinforces the importance of the organisational and environmental context for HRM.     

Incentive Pay and Firm Performance: Moderating Roles of Procedural Justice Climate and Environmental Turbulence

In connection with the literature on strategic reward and agency theory, this study investigates the effects of incentive pay on employee outcomes and firm performance. We identify employee outcomes, such as commitment and competence, as mediating processes that explain the effects of incentive pay on firm performance. We further propose procedural justice climate and environmental turbulence as boundary conditions that determine the strength of the effects of incentive pay on employee outcomes. The research model is tested using multisource data collected at three time points over a five‐year period from 227 Korean companies. Our analysis confirmed that incentive pay enhanced employee commitment and competence, which, in turn, improved the operational and financial performances of firms. The effect of incentive pay on employee commitment was negative for firms with a low procedural justice climate, but positive for firms operated under a highly turbulent environment. By contrast, the effect of incentive pay on employee competence was positive only for firms operated under a stable environment. This study enriches the literature by presenting and validating plausible underlying mechanisms and boundary conditions under which strategic performance–contingent incentive pay affects firm performance. © 2015 Wiley Periodicals, Inc.     

Demographic Diversity in the Boardroom: Mediators of the Board Diversity–Firm Performance Relationship

Whereas the majority of research on board diversity explores the direct relationship between racial and gender diversity and firm performance, this paper investigates mediators that explain how board diversity is related to firm performance. Grounded in signalling theory and the behavioural theory of the firm, we suggest that this relationship operates through two mediators: firm reputation and innovation. In a sample of Fortune 500 firms, we find a positive relationship between board racial diversity and both firm reputation and innovation. We find that reputation and innovation both partially mediate the relationship between board racial diversity and firm performance. In addition, we find a positive relationship between board gender diversity and innovation.     

跨市场上市公司审计定价研究

本文从我国跨市场上市公司审计师选择的特点出发,考察了境内外审计市场不同需求弹性对审计收费的影响,并对协同效应和范围经济对审计定价的影响进行了研究。结论表明,当审计师对境外报表进行审计时,“四大”的审计收费显著高于非“四大”。而当会计师事务所对境内报表进行审计时,“四大”的审计定价与非“四大”相比无显著差异。结论验证了“四大”不同市场不同定价的竞争策略,如果进行审计的会计师事务所之间可以实现协同效应或范围经济,从而能节约跨市场上市公司的时间和精力,上市公司将愿意付出更多的审计费用。结论支持了境内会计师事务所可以通过与境外会计师事务所建立联系构筑竞争优势的策略。     

人力资本与企业绩效关系的实证分析

国内外对企业绩效的实证研究主要是研究财务指标与企业绩效的关系,缺少对非财务指标的实证研究特别是人力资本与企业绩效关系的实证研究。本文选取反映人力资本的指标和反映企业绩效的指标,随机选取上市公司的数据进行多元回归分析,结果发现,员工高学历比例和员工专门技术人员比例,与企业绩效存在显著关系。笔者建议,要明确企业绩效与人力资本的关系,重视人力资本的作用,同时要结合行业特点和竞争程度综合考虑企业绩效。     

Does contingent pay encourage positive employee attitudes and intensify work?

This article explores the relationships between three dimensions of contingent pay – performance‐related pay, profit‐related pay and employee share‐ownership – and positive employee attitudes (job satisfaction, employee commitment and trust in management). The article also examines a conflicting argument that contingent pay may intensify work, and this can detract from its positive impact on employee attitudes. Of the three contingent pay dimensions, only performance‐related pay had direct positive relationships with all three employee attitudes. Profit‐related pay and employee share‐ownership had a mix of negative and no significant direct relationships with employee attitudes, but profit‐related pay showed U‐shaped curvilinear relationships with all three employee attitudes. The results also indicated that performance‐related pay is associated with work intensification, and this offsets some of its positive impact on employee attitudes.     

Collaboration in Multi-Partner R&D Projects: The Impact of Partnering Scale and Scope

How can firms design collaboration structures for effective performance in R&D projects that involve multiple partners? To address this question, we examine the theoretical underpinnings of collaboration structures in multi-partner R&D projects—i.e., the scale and the scope of partnering efforts. Partnering scale captures the extent of resource interdependencies between a firm and its partners; partnering scope captures both the breadth and depth of the interdependencies between a firm and its partners. Using primary data from 147 multi-partner R&D projects, we develop and test hypotheses that examine the impact of partnering scale and scope decisions on partnering performance. Results indicate that partnering scale has a curvilinear relationship with partnering performance. That is, intermediate levels of partnering scale are associated with higher partnering performance, compared to low or high levels of partnering scale. However, we also find that the nature of this relationship is moderated by the sub-dimensions of partnering scope. Specifically, increase in partnering breadth appears to magnify the negative effect of partnering scale on performance. In contrast, increase in partnering depth appears to overcome this negative effect, allowing firms to operate at higher levels of partnering scale. Taken together, these results highlight the importance of adopting a comprehensive approach to designing collaboration structures for multi-partner R&D projects.     

Is there an inverse U-shaped relationship between pay and performance?

Given the increasing concerns about the escalation in executive compensation, this study aims to provide new insights into the link between executive pay and firm performance by empirically testing for an inverse U-shaped relationship. For this purpose, we re-examine the relation using a nonlinear model. Our results show a significant inverse U-shaped relationship between executive pay and firm performance. The finding provides support for both optimal contracting and managerial power theories with the former dominating at low level of firm performance and the latter dominating at high level of firm performance.     

Exploring the relationship between HRM and firm performance: A meta-analysis of longitudinal studies

Existing literature on human resource management (HRM) practices and firm performance suggests that there is a positive association between the two variables. Most of the studies, however, are based on cross-sectional datasets and only few of them use panel or longitudinal datasets, which better allow the researchers to deal with problems of endogeneity. This paper draws on meta-analysis techniques to estimate the effect size of the relationship between high performance work practices (HPWPs) and firm performance measures based on the available longitudinal studies. We also examine whether the effect is greater for a combination of HPWPs than for individual HPWPs, and for operational performance than for financial performance. The results from statistical aggregation of eight longitudinal HRM-performance studies demonstrate an overall reported correlation of 0.287. Additionally we find that a set of integrated, mutually reinforcing HPWPs has a stronger impact on firm performance than do HRM practices individually and that, this effect is statistically invariant between operational performance and financial performance.     

Does the Diversification–Firm Performance Relationship Change Over Time? A Meta‐Analytical Review

We study the relationship between diversification and firm performance in the context of the decline in levels of diversification over time. We argue that the pressure to reduce diversification may have more strongly affected those firms whose diversification strategies were most detrimental to firm performance. We employ meta‐analytical regression (MARA) in order to test our hypotheses, using a total of 267 primary studies containing 387 effect sizes based on 150,000 firm‐level observations from over 60 years of research on the diversification–firm performance relationship. The findings suggest that levels of unrelated diversification have decreased, whereas levels of related diversification have increased since the mid‐1990s, following an initial decrease in the 1970s and 1980s. Furthermore, we find that the relationship between unrelated diversification and firm performance has improved significantly over time, whereas the relationship between related diversification and performance has remained relatively stable.     

Financial reporting fraud and CEO pay-performance incentives

Because prior studies find mixed results on the relation between CEOs’ pay performance incentives and a firm’s likelihood of financial reporting fraud, we restudy their relationship using innovative research methods. First, we concentrate on incentives from granting options rather than equity-based incentives. Second, we emphasize vested options, disregarding unvested option holdings, and take the logarithm transformation of option incentives. Third, we analyse the impact of option incentives on future financial reporting irregularities. Using this innovative approach as well as a full sample and a matched sample, we find that an increase in executives’ option incentives raises the likelihood of financial reporting violations. Moreover, the effect of option incentives on financial reporting fraud is moderated by auditor effort. In addition, we find that another proxy for the measurement of executives’ option incentives, namely, the number of vested options by executives, is highly correlated with the CEO’s vested stock option sensitivity.     

Performance pay in Canadian and Australian firms: a comparative study

Based on data from 315 Canadian and Australian firms, this study examines the incidence of 13 specific forms of performance pay, along with factors that may affect their incidence. Overall, Canadian and Australian firms showed similar incidences of most forms of performance pay, with employee profit sharing the notable exception. Depending on the type and form of performance pay, various factors predicted the incidence of performance pay. As expected, firm size and unionization were among the most important predictors of individual and organizational performance pay, but neither factor predicted group performance pay. The results also indicated that high involvement firms in both Canada and Australia used more organizational performance pay than other firms, but not more group or individual performance pay. This study provides qualified support for convergence in international pay practices, but also highlights the continued importance of contextual and firm-level factors.     

彩票文化能够影响企业财务违规行为吗？——来自地区彩票消费的证据

文化作为非正式制度的核心组成,是影响企业行为的重要因素。基于彩票文化视角,考察了地区文化对企业财务违规的影响,发现地区彩票文化越盛行,个体的冒险倾向和风险容忍度越强,企业财务违规的可能性越大。异质性分析结果表明:当企业面临的业绩压力较大时,彩票文化对企业违规的正向影响更加明显,而良好的治理水平有利于缓解两者之间的关系;彩票文化浓厚的地区,企业财务决策偏于激进,财务信息质量较低。研究成果为规范企业行为、促进资本市场健康发展提供了一定的理论借鉴和实践启示。