Publication Type

Journal Article

Version

acceptedVersion

Publication Date

11-2010

Abstract

Building on information-processing perspectives and the Japanese contextual factors, this study investigates the relationships between firm strategy and executive bonus pay as well as the moderating role of foreign ownership on the strategy–compensation relationship in Japanese firms. We focus on R&D investment and product diversification as strategy variables and investigate their direct effects on executive bonus pay. Further, we examine the moderating effects of foreign ownership on the strategy–pay sensitivity. The results, based on a sample of the 148 largest industrial firms in Japan for the 1990–1997 period, show that both R&D investment and product diversification are positively related to executive bonus pay. Our findings also indicate that foreign ownership negatively moderates the relationships between the strategy variables and executive compensation, suggesting that foreign investors play an active monitoring role, reducing cash bonus payments when their invested firms choose to increase R&D or pursue diversification strategy.

Keywords

Corporate governance, Firm strategy, Executive compensation, Information-processing perspective, Ownership structure, Japan

Discipline

Asian Studies | Strategic Management Policy

Research Areas

Strategy and Organisation

Publication

Journal of Business Research

Volume

63

Issue

11

First Page

1254

Last Page

1260

ISSN

0148-2963

Identifier

10.1016/j.jbusres.2010.06.012

Publisher

Elsevier

Copyright Owner and License

Authors

Additional URL

https://doi.org/10.1016/j.jbusres.2010.06.012

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