Executive Pay in Japan: The Role of Bank-Appointed Monitors and the Main Bank Relationship

Naohito Abe (), 修人 阿部, ナオヒト アベ, Noel Gaston, Katsuyuki Kubo and 克行 久保

No 2001-10, CEI Working Paper Series from Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University

Abstract: The tournament model has the feature that executive compensation depends on the wages paid to workers at lower levels of the corporate hierarchy. The agency model shows that compensation based on firm performance is a means by which incentives can be provided to executives once a promotion tournament has been resolved. In this paper, we combine aspects of both models and show that the existence of an outsider who monitors the firm's activities will lower the sensitivity of pay to firm performance for top executives and reduce the importance of tournament-based incentives. Using panel data for 56 Japanese electronics firms, we find support for the notion that bank-appointed Board members help monitor top executives and that tournament considerations are a particularly important feature of executive compensation in Japan.

Keywords: Executive pay; tournaments; agency; monitoring; main bank relationship (search for similar items in EconPapers)
JEL-codes: G30 J33 J44 L63 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2001-09
Note: 37144
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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https://hermes-ir.lib.hit-u.ac.jp/hermes/ir/re/13953/wp2001-10a.pdf

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Journal Article: Executive pay in Japan: the role of bank-appointed monitors and the Main Bank relationship (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:hit:hitcei:2001-10

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