The impact of foreign direct investment on executive compensation: evidence from the Great Recession

Hiroyuki Kuwahata

Applied Economics Letters, 2023, vol. 30, issue 13, 1738-1743

Abstract: This study examines the causal effect of outward foreign direct investment (FDI) on executive compensation using compensation data of 2,391 Japanese multinational enterprises (MNEs). A negative demand shock caused by the Great Recession in 2008 is applied to identify the impact of FDI on annual payments to corporate executives. We find that firms engaged in FDI tended to decrease executive compensation in response to the crisis to a greater degree than firms with no foreign investment. The result is consistent with the view that FDI activities may explain the recent increase in executive compensation.

Date: 2023
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DOI: 10.1080/13504851.2022.2082361

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