Executive Salaries as Tournament Prizes and Executive Bonuses as Managerial Incentives in Japan

Xu, Peng

doi:10.1006/jjie.1997.0373

Cited by 40 publications

(51 citation statements)

References 23 publications

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“…The findings generally support Xu's (1997) findings. Our estimated pay gap elasticities are smaller, which is not terribly surprisingly given the dissimilarity of our samples (Xu's sample covers an earlier time period than ours and includes firms in the general machinery industries).…”

Section: Confronting Empirical Realities: the Determinants Of Performsupporting

confidence: 78%

“…The most notable control is the probability of promotion or structure of the firm's hierarchy. In order to provide first period incentives, a low probability of promotion must be 'compensated' with an even larger prize (see Rosen, 1986;Xu 1997). The result that the prize increases in the number of equally able contestants can be readily seen from inspecting either equation (1) or equation (7).…”

Section: Confronting Empirical Realities: the Determinants Of Performmentioning

confidence: 99%

“…Existing research on executive pay in Japan (e.g., Kaplan, 1994;Kato, 1997;Xu, 1997;Kubo, 2001) suggests that there is a positive and significant relationship between directors' bonuses and firm profits, although the relationship between directors' pay and performance is far weaker. In addition, Kato (1997) shows that the level of directors' compensation is significantly smaller in companies of keiretsu.…”

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confidence: 99%

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Executive pay in Japan: the role of bank-appointed monitors and the Main Bank relationship

Abe

Gaston

Kubo

2005

Japan and the World Economy

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The tournament model has the feature that executive compensation depends on the wages paid to workers at lower levels of the corporate hierarchy. The agency model shows that compensation based on firm performance is a means by which incentives can be provided to executives once a promotion tournament has been resolved. In this paper, we combine aspects of both models and show that the existence of an outsider who monitors the firm's activities will lower the sensitivity of pay to firm performance for top executives and reduce the importance of tournament-based incentives. Using panel data for 56 Japanese electronics firms, we find support for the notion that bank-appointed Board members help monitor top executives and that tournament considerations are a particularly important feature of executive compensation in Japan.

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Section: Confronting Empirical Realities: the Determinants Of Performsupporting

confidence: 78%

Section: Confronting Empirical Realities: the Determinants Of Performmentioning

confidence: 99%

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confidence: 99%

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Executive pay in Japan: the role of bank-appointed monitors and the Main Bank relationship

Abe

Gaston

Kubo

2005

Japan and the World Economy

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“…For an authoritative survey of earlier work, see Rosen (1990) who concludes his survey by urging scholars to broaden their inquiry beyond the U.S. to other countries. 2 See, for instance, Kaplan (1994), Xu (1997), Ang and Constand (1997), Joh (1999), Kubo (2001) and Kato and Kubo (2003). For studies using an alternative income tax return data set in Japan, see Kato and Rockel (1992) and Kato (1997).…”

Section: Introductionmentioning

confidence: 99%

Executive compensation, firm performance, and Chaebols in Korea: Evidence from new panel data

Kato

Kim²,

Lee³

2007

Pacific-Basin Finance Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. This paper provides the first rigorous econometric estimates on the pay-performance relations for executives of Korean firms with and without Chaebol affiliation. To do so, we have assembled for the first time panel data (that provide information not only on executive compensation and firm performance but also on Chaebol affiliation) for 246 firms that were included in KOSPI200 for at least two consecutive years from 1998 to 2001. Contrary to a popular belief that Korean corporate governance and the structure of Korean executive compensation is considerably different from elsewhere in the West, we find that cash compensation of Korean executives is statistically significantly related to stock market performance and that the magnitude of the sensitivity of pay to stock market performance is comparable to the U.S. and Japan. Perhaps even more importantly, further analysis reveals for the first time that such overall significant executive pay-performance link is driven by nonChaebol firms and that no such link exists for Chaebol firms. The evidence is consistent with the recent literature on the nature of Chaebols in Korea and the current corporate governance reform efforts in Korea that are aimed mostly at Chaebol firms. Terms of use: Documents in D I S C U S S I O N P A P E R S E R I E SJEL Classification: M52, M12, G30, G15, J33, O53

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“…For other countries, in particular Asian countries, data on CEO compensation are typically not publicly available and thus most studies use average pay for all executives. See, for instance, Kaplan (1994), Xu (1997), Ang and Constand (1997), Joh (1999) and Kubo (2001) on Japan; and Kato, Kim and Lee (2004) on Korea. The rare exception is Kato and Kubo (2005), which use proprietary data on Japanese CEO compensation.…”

Section: Introductionmentioning

confidence: 99%

Executive Compensation, Firm Performance, and Corporate Governance in China: Evidence from Firms Listed in the Shanghai and Shenzhen Stock Exchanges

Kato

Long

2006

Economic Development and Cultural Change

250

192

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Executive Salaries as Tournament Prizes and Executive Bonuses as Managerial Incentives in Japan

Cited by 40 publications

References 23 publications

Executive pay in Japan: the role of bank-appointed monitors and the Main Bank relationship

Executive pay in Japan: the role of bank-appointed monitors and the Main Bank relationship

Executive compensation, firm performance, and Chaebols in Korea: Evidence from new panel data

Executive Compensation, Firm Performance, and Corporate Governance in China: Evidence from Firms Listed in the Shanghai and Shenzhen Stock Exchanges

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