Which top managements are paid more? Commercial banks versus security brokers and dealers Online publication date: Mon, 25-Oct-2010
by Sangheon Shin, Joo Y. Jung
International Journal of Services and Standards (IJSS), Vol. 6, No. 2, 2010
Abstract: We empirically test the relationship between top management compensation and performance in terms of Pay-Performance Sensitivity (PPS). We have mixed results for fixed compensation where PPS is significantly associated with both past-year and contract-year performance for commercial banks industry, whereas security brokers and dealers industry exhibits no significant PPS relationship. However, flexible and total compensations have PPS strongly related to the contract-year performance for both commercial banks and security brokers and dealers industries. Further, there is significant difference in PPS between commercial banks and security brokers and dealers industries. Moreover, firm size and level of leverage show significant negative and positive relationship with PPS, respectively. These imply that top managements in security brokers and dealers industry, which is relatively smaller in size and higher in level of leverage, are compensated more than those in the commercial banks industry for the same amount of increase in the shareholders' wealth.
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