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The sensitivity of compensation to social capital: Family CEOs vs. nonfamily CEOs in the family business groups


  • Young, Chaur-Shiuh
  • Tsai, Liu-Ching


This study examines the role of CEO social capital, defined as external directorship ties held by the CEO, in determining family vs. nonfamily CEOs' compensation in a network-based business society and governance system. Using a sample of pooled data of family firms listed on the Taiwan Stock Exchange (TSE) from 2000 to 2002, the empirical results show that CEO social capital is an important determinant in setting nonfamily CEOs' pay level, consistent with the expectation of the contractual governance model. By contrast, as expected by relational governance model, family CEOs' social capital is not incentive-relevant. This study extends the literature on CEO compensation by documenting that in a market where guanxi and connections are considered valuable business tools, corporations will be willing to compensate professional CEOs for the social capital that they bring to the firm.

Suggested Citation

  • Young, Chaur-Shiuh & Tsai, Liu-Ching, 2008. "The sensitivity of compensation to social capital: Family CEOs vs. nonfamily CEOs in the family business groups," Journal of Business Research, Elsevier, vol. 61(4), pages 363-374, April.
  • Handle: RePEc:eee:jbrese:v:61:y:2008:i:4:p:363-374

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    References listed on IDEAS

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    1. repec:spr:jmgtco:v:28:y:2018:i:4:d:10.1007_s00187-018-0255-3 is not listed on IDEAS
    2. Acquaah, Moses, 2011. "Utilization and value of social networking relationships in family and nonfamily firms in an African transition economy," European Management Journal, Elsevier, vol. 29(5), pages 347-361.
    3. Guidice, Rebecca M. & Mero, Neal P. & Greene, Juanne V., 2013. "Perceptions of accountability in family business: Using accountability theory to understand differences between family and nonfamily executives," Journal of Family Business Strategy, Elsevier, vol. 4(4), pages 233-244.
    4. Erlane K. Ghani & Nur Azrin Mat Tarmezi, 2016. "The Effect of Corporate Disclosure Guide on Information Disclosure among Malaysian Public Listed Companies," International Journal of Academic Research in Business and Social Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Business and Social Sciences, vol. 6(9), pages 362-376, September.
    5. Kanagaretnam, Kiridaran & Mestelman, Stuart & Nainar, S.M. Khalid & Shehata, Mohamed, 2014. "Transparency and empowerment in an investment environment," Journal of Business Research, Elsevier, vol. 67(9), pages 2030-2038.
    6. Céspedes, Jacelly & González, Maximiliano & Molina, Carlos A., 2010. "Ownership and capital structure in Latin America," Journal of Business Research, Elsevier, vol. 63(3), pages 248-254, March.
    7. repec:kap:asiapa:v:35:y:2018:i:1:d:10.1007_s10490-017-9516-1 is not listed on IDEAS
    8. Mahdieh Nor Ali Ahari & Mohammad Jalili, 2016. "Comparison of Accounting Earnings Informativeness in Family and NonFamily Firms Listed In Tehran Stock Exchange," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 6(3), pages 110-118, July.
    9. Wilson, Shawn R. & Whitmoyer, Jeffrey G. & Pieper, Torsten M. & Astrachan, Joseph H. & Hair, Joseph F. & Sarstedt, Marko, 2014. "Method trends and method needs: Examining methods needed for accelerating the field," Journal of Family Business Strategy, Elsevier, vol. 5(1), pages 4-14.
    10. Balsam, Steven & Fernando, Guy D. & Tripathy, Arindam, 2011. "The impact of firm strategy on performance measures used in executive compensation," Journal of Business Research, Elsevier, vol. 64(2), pages 187-193, February.

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