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

Herman Sahni and Christian Nsiah

International Business Research, 2018, vol. 11, issue 6, 165-184

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.

Keywords: apparel industry; data envelopment analysis; efficient contracting; executive compensation; financial efficiency; Malmquist productivity index (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:ibn:ibrjnl:v:11:y:2018:i:6:p:165-184

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