Factors Determining CEO Compensation in an Emerging Economy : Evidence from India

Authors

  •   Deepti Pathak Associate Professor, Narsee Monjee Institute of Management Studies, 12-13-95, Street Number 3, Near Big Bazaar, Tarnaka, Shri Mitra Ramana Classic Enclave, Tarnaka, Hyderabad, Telangana - 500 017
  •   Monika Chopra Assistant Professor, International Management Institute New Delhi, B 10, Tara Crescent, Block B, Qutab Institutional Area, New Delhi

DOI:

https://doi.org/10.17010/ijf/2021/v15i4/158669

Keywords:

EO Compensation

, Firm Performance, Growth, Risk, Corporate Governance, Panel Regression.

JEL Classification Codes

, G32, M5, M52.

Paper Submission Date

, March 3, 2020, Paper Sent Back for Revision, September 18, Paper Acceptance Date, December 29, Paper Published Online, April 15, 2021.

Abstract

Executive compensation has been a topic of great interest in the academics as well as in the corporate world due to a growing bent of firms towards corporate governance practices. The present research work examined the various firm specific characteristics that influence the components of CEO’s compensation in Indian firms. The study selected a sample of 123 publicly listed Indian firms across different sectors. The research identified the determinants of CEO compensation in an emerging economy, India using data from FY 2012–18, a period that witnessed various changes in the executive compensation structure post the implementation of Companies Act, 2013. A panel data regression of select variables indicated that in India, a firm’s performance with respect to its profitability affected the retirement benefits given to CEOs, while its leverage and size significantly affected CEO’s salary as well as total remuneration. In addition, we found that firm’s size had a significant relationship with bonus component, and contribution to provident fund for key executives. However, none of the variables except firm’s size were found to have a significant relationship with the perquisites paid to the CEOs. The study concluded by giving policy implications and suggestions about linking CEO compensation to profitability, stability, and sustainability of the organization.

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Author Biographies

Deepti Pathak, Associate Professor, Narsee Monjee Institute of Management Studies, 12-13-95, Street Number 3, Near Big Bazaar, Tarnaka, Shri Mitra Ramana Classic Enclave, Tarnaka, Hyderabad, Telangana - 500 017

ORCID iD : http://orcid.org/0000-0003-0766-6254

Monika Chopra, Assistant Professor, International Management Institute New Delhi, B 10, Tara Crescent, Block B, Qutab Institutional Area, New Delhi

ORCID iD : https://orcid.org/0000-0001-5943-9104

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Published

2021-04-30

How to Cite

Pathak, D., & Chopra, M. (2021). Factors Determining CEO Compensation in an Emerging Economy : Evidence from India. Indian Journal of Finance, 15(4), 8–22. https://doi.org/10.17010/ijf/2021/v15i4/158669

Issue

Volume 15, Issue 4, April 2021

Section

Articles
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