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The Relationship between Managerial Compensation and Business Performance in Japan: New Evidence using Micro Data

Hideaki Sakawa () and Naoki Watanabel ()

No 06-29, Discussion Papers in Economics and Business from Osaka University, Graduate School of Economics

Abstract: This paper examines the relationship between the level of Japanese business managers' compensation and the quality of corporate governance, and whether weaker governance structures lead to poorer future performance. The conclusions of this paper are as follows. First, the level of Japanese business managers' compensation increases as the percentage of 'old', 'bank' and 'gray' outside directors increases. Compensation also increases with board stockholding and block holding. This suggests weak monitoring by old, bank and gray outside directors and block holders. Second, our results show that firms with weaker governance structures have poorer performance. These results suggest the existence of an overcompensation problem with Japanese managers similarly to the US.

Keywords: Board of Directors; Corporate Governance; Managers' Compensation; Ownership Structure. (search for similar items in EconPapers)
JEL-codes: G30 G32 J33 L22 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2006-11
New Economics Papers: this item is included in nep-bec, nep-eff and nep-sea
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http://www2.econ.osaka-u.ac.jp/library/global/dp/0629.pdf (application/pdf)

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Journal Article: Relationship between Managerial Compensation and Business Performance in Japan: New Evidence Using Micro Data (2008) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:osk:wpaper:0629

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