Market Competition, Managerial Incentives and Agency Cost
Hui San Loh and
Global Business Review, 2020, vol. 21, issue 4, 937-955
This study investigates the determinants of board of director compensation from the view of strategic management. Specifically, this study examines the association between product market competition and directorsâ€™ compensation for a sample of 524 listed firms in Malaysia from 2010 to 2014. We find that there is a positive relationship between a competitive firm and its compensation to its directors. Our research indicates that managerial incentives reflect more of talent appreciation, rather than purely for acknowledging better performance or a bigger size firm. This research contests the use of agency theory and managerialism in explaining directorsâ€™ compensation, especially for the developing country context of Malaysia. Our findings also imply that firms may pay higher compensation in a competitive market.
Keywords: Product market competition; managerial compensation; director incentives; agency cost; managerialism (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:sae:globus:v:21:y:2020:i:4:p:937-955
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