Impact of Managerial Ability and Power on CEOs Compensation
An Empirical Evidence from Indian Companies
Abstract
The present study aims to test whether the rent extraction or efficient contracting which significantly influences the compensation of CEOs in Indian companies. By drawing the sample from all the listed companies providing data on CEO characteristics from the year 2006 to 2018, the study tests the empirical model using ordinary least squares regression and quantile regression. The results of analysis reveal that CEO compensation is tenure-variant and there is a trivial difference between the impact of CEO power and CEO tenure. It is in line with the bargaining theory of managerial ability view on CEO compensation. It supports efficient contracting in CEO compensation. The results of the analysis also reveal that impact of CEO power is comparatively less for long-tenured CEOs. It implies that managerial ability view is maintained and CEO compensation is influenced by their bargaining power. The results also prove that power premium is more in case of group companies compared to non-group companies.
Key words: CEO compensation, rent extraction theory, efficient contracting theory, CEO Power, CEO Tenure, Indian companies.
Downloads
Copyright (c) 2020 Srikanth Potharla
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.
Authors submitting articles for publication warrant that the work is not an infringement of any existing copyright and will indemnify the publisher against any breach of such warranty. By publishing in Applied Finance Letters, the author(s) retain copyright but agree to the dissemination of their work through Applied Finance Letters.
By publishing in Applied Finance Letters, the authors grant the Journal a Creative Commons nonexclusive worldwide license (CC-BY-NC-ND: Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License) for electronic dissemination of the article via the Internet, and, a nonexclusive right to license others to reproduce, republish, transmit, and distribute the content of the journal. The authors grant the Journal the right to transfer content (without changing it), to any medium or format necessary for the purpose of preservation.
Authors agree that the Journal will not be liable for any damages, costs, or losses whatsoever arising in any circumstances from its services, including damages arising from the breakdown of technology and difficulties with access.
