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/lp/emerald-publishing/managerial-compensation-and-firm-performance-the-moderating-role-of-Y1Gy01ZiPT
- Publisher
- Emerald Publishing
- Copyright
- Copyright © 2005 Emerald Group Publishing Limited. All rights reserved.
- ISSN
- 1536-5433
- DOI
- 10.1108/15365430580001318
- Publisher site
- See Article on Publisher Site
Abstract
This paper analyzes the effect of strategic context on managerial compensation design, and the interactive influence on firm performance for a set of Spanish companies. Specifically, this study examines the performance implications of the fit between different managerial compensation systems and diverse firm’s strategic orientations – representing various levels of managerial discretion. Based on a framework combining agency theory and managerial discretion concept, a research design with both archival and survey data is used to test hypotheses in a sample of 82 firms. The findings offer sufficient confirmation of theoretical arguments, providing extensions of this research stream for non‐U.S. firms. Results show that firms benefit from the design of managerial compensation systems when they match the managerial control and risk‐bearing requirements imposed by the strategic context. Specifically, risk‐encouraging compensation systems are better for prospector firms – high level of managerial discretion – whereas risk‐discouraging compensation systems are better for defender firms – low level of managerial discretion.
Journal
Management Research: The Journal of the Iberoamerican Academy of Management – Emerald Publishing
Published: Jul 1, 2005
Keywords: Compensation; Strategy; Control; Managerial discretion