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Director Optimal Pay against Fat Cats in Taiwan

Author

Listed:
  • Feng-Li Lin
  • Shiow-Jen Wang
  • Guan-Hao Peng

Abstract

Due to the overcompensation phenomenon that exists in Taiwan, the "fat cat" issue continues to persist; therefore, vast reforms in regards to director compensation have been prompted in recent years. This investigation assessed 665 Taiwanese firms listed on the Taiwanese Stock exchange over a 10-year period (2002-2011). The main purpose is to test whether there is an optimal level of director compensation, which maximizes firm value. This study adopts Tobin's Q as the proxy for firm value and finds that director compensation between 0.0283 percent and 2.3077 percent is an optimal level to maximize firm value. These results show that when control-affiliated directors have incentives to increase firm value, they serve as reliable monitors due to their individual financial gains.Keywords- Nonlinear, Firm value, Fat cat, Director compensation, Optimal levelJEL classification- G31, G32, G34, G35, G38Â

Suggested Citation

  • Feng-Li Lin & Shiow-Jen Wang & Guan-Hao Peng, 2015. "Director Optimal Pay against Fat Cats in Taiwan," Accounting and Finance Research, Sciedu Press, vol. 4(3), pages 1-31, August.
    • Handle: RePEc:jfr:afr111:v:4:y:2015:i:3:p:31
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    References listed on IDEAS

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    JEL classification:

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

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