Title: Recoupling compensation-performance relationship: a mediating role of performance

Authors: Xin Liang, Sibin Wu, Joo Y. Jung

Addresses: Labovitz School of Business & Economics, University of Minnesota Duluth, 412 Library Drive, Duluth, MN, 55812, USA. ' College of Business Administration, University of Texas-Pan American, 1201 West University Drive, Edinburg, TX, 78539, USA. ' College of Business Administration, University of Texas-Pan American, 1201 West University Drive, Edinburg, TX, 78539, USA

Abstract: Recent research on executive compensation studies attempts to decouple the executive compensation and firm performance relationship. This study intends to clarify the conflicting results reported by previous researchers by introducing a new theoretical perspective. A new methodological technique to explain the controversial empirical evidences is also employed. Different from most researchers who treated sales as a firm size indicator in the relationship between compensation and performance, we demonstrate in this paper that sales is more related to performance than to firm size in the compensation context by using structural equation modelling. Our results show that performance mediates the relationship between firm size and executive compensation.

Keywords: executive compensation; mediation; structural equation modelling; firm performance; firm size.

DOI: 10.1504/IJHRDM.2009.025067

International Journal of Human Resources Development and Management, 2009 Vol.9 No.4, pp.317 - 333

Available online: 11 May 2009 *

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