Incentivebased executive compensation is regarded as a mechanism for alleviating agency problems between executives and shareholders. Seventythree New Zealand NZ listed companies are used to examine the relationship between executive incentive compensation schemes ICS and firm performance. The results suggest that neither compensation level nor adoption of an ICS are significantly related to returns to shareholders or ROA. However, there is a statistically significant relationship between Tobin's q and both CEO compensation and executive share ownership. Further, the evidence suggests the recent compensation disclosure requirements in NZ are not yet stringent enough to allow adequate analysis of the link between ICSs and corporate performance.
Studies in Economics and Finance – Emerald Publishing
Published: Jan 1, 2003