Market Competition, Managerial Incentives and Agency Cost. Issue 4 (August 2020)

• Record Type: Journal Article
• Authors: Brahmana, Rayenda Khresna; Loh, Hui San; Kontesa, Maria
• Is Part Of: Global business review. Volume 21:Issue 4(2020)
• Page Start: 937
• Page End: 955
• Publication Date: 2020-08
• Subjects: Product market competition -- managerial compensation -- director incentives -- agency cost -- managerialism; Economic history -- 1990- -- Periodicals; Industrial management -- Periodicals; Business -- Periodicals; Commerce -- Periodicals; 650.05
• DOI: 10.1177/0972150919853476
• Languages: English
• ISSNs: 0972-1509

Abstract

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 directors' 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 directors' compensation, especially for the developing country context of Malaysia. Our findings also imply that firms may pay higher compensation in a competitive market.