Executive Compensation, Firm Performance, and Chaebols in Korea: Evidence from New Panel Data

Takao Kato, Woochan Kim () and Ju Ho Lee ()
Additional contact information
Ju Ho Lee: KDI School of Public Policy and Management

No 1783, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This paper provides the first rigorous econometric estimates on the pay-performance relations for executives of Korean firms with and without Chaebol affiliation. To do so, we have assembled for the first time panel data (that provide information not only on executive compensation and firm performance but also on Chaebol affiliation) for 246 firms that were included in KOSPI200 for at least two consecutive years from 1998 to 2001. Contrary to a popular belief that Korean corporate governance and the structure of Korean executive compensation is considerably different from elsewhere in the West, we find that cash compensation of Korean executives is statistically significantly related to stock market performance and that the magnitude of the sensitivity of pay to stock market performance is comparable to the U.S. and Japan. Perhaps even more importantly, further analysis reveals for the first time that such overall significant executive pay-performance link is driven by non-Chaebol firms and that no such link exists for Chaebol firms. The evidence is consistent with the recent literature on the nature of Chaebols in Korea and the current corporate governance reform efforts in Korea that are aimed mostly at Chaebol firms.

Keywords: executive compensation; firm performance; corporate governance; Korea; Chaebols (search for similar items in EconPapers)
JEL-codes: G15 G30 J33 M12 M52 O53 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2005-09
New Economics Papers: this item is included in nep-bec, nep-fin and nep-tid
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Published - published in: Pacific-Basin Finance Journal, 2007, 15 (1), 36-55

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Journal Article: Executive compensation, firm performance, and Chaebols in Korea: Evidence from new panel data (2007)
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