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The impact of firm strategy and foreign ownership on executive bonus compensation in Japanese firms

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  • Yoshikawa, Toru
  • Rasheed, Abdul A.
  • Del Brio, Esther B.

Abstract

Building on information-processing perspectives and the Japanese contextual factors, this study investigates the relationships between firm strategy and executive bonus pay as well as the moderating role of foreign ownership on the strategy-compensation relationship in Japanese firms. We focus on R&D investment and product diversification as strategy variables and investigate their direct effects on executive bonus pay. Further, we examine the moderating effects of foreign ownership on the strategy-pay sensitivity. The results, based on a sample of the 148 largest industrial firms in Japan for the 1990-1997 period, show that both R&D investment and product diversification are positively related to executive bonus pay. Our findings also indicate that foreign ownership negatively moderates the relationships between the strategy variables and executive compensation, suggesting that foreign investors play an active monitoring role, reducing cash bonus payments when their invested firms choose to increase R&D or pursue diversification strategy.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Business Research.

Volume (Year): 63 (2010)
Issue (Month): 11 (November)
Pages: 1254-1260

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Handle: RePEc:eee:jbrese:v:63:y:2010:i:11:p:1254-1260

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Web page: http://www.elsevier.com/locate/jbusres

Related research

Keywords: Corporate governance Firm strategy Executive compensation Information-processing perspective Ownership structure;

References

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  1. Kato, Takao, 1997. "Chief executive compensation and corporate groups in Japan: New evidence from micro data," International Journal of Industrial Organization, Elsevier, vol. 15(4), pages 455-467, July.
  2. Trevor Buck, 2003. "Long Term Incentive Plans, Executive Pay and UK Company Performance," Journal of Management Studies, Wiley Blackwell, vol. 40(7), pages 1709-1727, November.
  3. Yoshikawa, Toru & Phan, Phillip H., 2003. "The Performance Implications of Ownership-driven Governance Reform," European Management Journal, Elsevier, vol. 21(6), pages 698-706, December.
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Cited by:
  1. Won Oh & Young Chang & Aleksey Martynov, 2011. "The Effect of Ownership Structure on Corporate Social Responsibility: Empirical Evidence from Korea," Journal of Business Ethics, Springer, vol. 104(2), pages 283-297, December.

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