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Preventing or encouraging illegal activities by construction firms: effects of top management team compensation and aspiration-performance discrepancies

Preventing or encouraging illegal activities by construction firms: effects of top management... Corporate illegal activities may result in fatal injuries and economic losses and have been widely reported in the construction industry. This study is to investigate the relationship between top management team (TMT) compensation and corporate illegal activities with the moderating effects of aspiration–performance discrepancies.Design/methodology/approachUsing a multi-year sample of Chinese construction firms from 2011 to 2017, this paper employed a hierarchical logit regression model with fixed effects.FindingsThis study indicates that TMT compensation is positively related to the likelihood of corporate illegal activities. It also finds performance higher than aspirations would lower the probability of illegal activities while performance lower than aspirations also decreases the occurrence of illegal behaviors. Finally, the positive relationship between TMT compensation and illegal activities is strengthened by aspiration–performance discrepancies.Practical implicationsIt recommended the design of executive compensation may need to be reconsidered. Next, companies need to carefully monitor top management team, especially when performance is lower than the desired level. Finally, debt-to-equity ratio deserves more attention for Chinese construction firms in suppressing illegal activities.Originality/valueGiven the mixed effects of TMT compensation, this study confirms its positive impact on corporate illegal behaviors. Consistent with the behavioral theory of the firm, it unveils the direct and moderating effects of aspiration-performance discrepancies. The findings are beneficial for evaluating firms' performance and considering the prevention of corporate fraudulent activities. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Engineering, Construction and Architectural Management Emerald Publishing

Preventing or encouraging illegal activities by construction firms: effects of top management team compensation and aspiration-performance discrepancies

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Publisher
Emerald Publishing
Copyright
© Emerald Publishing Limited
ISSN
0969-9988
DOI
10.1108/ecam-08-2019-0440
Publisher site
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Abstract

Corporate illegal activities may result in fatal injuries and economic losses and have been widely reported in the construction industry. This study is to investigate the relationship between top management team (TMT) compensation and corporate illegal activities with the moderating effects of aspiration–performance discrepancies.Design/methodology/approachUsing a multi-year sample of Chinese construction firms from 2011 to 2017, this paper employed a hierarchical logit regression model with fixed effects.FindingsThis study indicates that TMT compensation is positively related to the likelihood of corporate illegal activities. It also finds performance higher than aspirations would lower the probability of illegal activities while performance lower than aspirations also decreases the occurrence of illegal behaviors. Finally, the positive relationship between TMT compensation and illegal activities is strengthened by aspiration–performance discrepancies.Practical implicationsIt recommended the design of executive compensation may need to be reconsidered. Next, companies need to carefully monitor top management team, especially when performance is lower than the desired level. Finally, debt-to-equity ratio deserves more attention for Chinese construction firms in suppressing illegal activities.Originality/valueGiven the mixed effects of TMT compensation, this study confirms its positive impact on corporate illegal behaviors. Consistent with the behavioral theory of the firm, it unveils the direct and moderating effects of aspiration-performance discrepancies. The findings are beneficial for evaluating firms' performance and considering the prevention of corporate fraudulent activities.

Journal

Engineering, Construction and Architectural Management – Emerald Publishing

Published: Jun 25, 2021

Keywords: Corporate illegal activities; Top management team; Compensation; Aspiration; Performance

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