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The Impact of Firm Financial Efficiency on Executive Compensation of United States Apparel Stores Industry: An Application of Panel Data Envelopment Analysis

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  • Herman Sahni
  • Christian Nsiah

Abstract

This study examines the effect of firm financial efficiency on executive compensation with an emphasis on the US apparel industry. We find that both annual efficiency levels and cumulative efficiency changes obtained from the Data Envelopment Analysis (DEA) are positively associated with CEO pay. The effect is stronger for technological changes and changes in scale efficiency. Our results seem to support the pay-for-efficiency paradigm, a stricter version of the pay-for-performance framework under the efficient contracting explanation for CEO pay.

Suggested Citation

  • Herman Sahni & Christian Nsiah, 2018. "The Impact of Firm Financial Efficiency on Executive Compensation of United States Apparel Stores Industry: An Application of Panel Data Envelopment Analysis," International Business Research, Canadian Center of Science and Education, vol. 11(6), pages 165-184, June.
    • Handle: RePEc:ibn:ibrjnl:v:11:y:2018:i:6:p:165-184
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    More about this item

    Keywords

    apparel industry; data envelopment analysis; efficient contracting; executive compensation; financial efficiency; Malmquist productivity index;
    All these keywords.

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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