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Nexus between Managerial Compensation and Financial Performance, Size of the Firm & Risk of Indian Manufacturing Companies: A Study on Automobile Companies

Brajaballav Pal , Brajaballav Pal , Poulomi Roy

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Journal of Social Welfare and Management 11(2):p 65-73, April-June 2019. | DOI: http://dx.doi.org/10.21088/jswm.0975.0231.11219.1

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Abstract

In India the issue of managerial compensation has been seen with greater importance since the start of liberalisation, privatization and globalisation. More specifically, after the collapse of some renowned large companies namely, Satyam Computers, Enron, Tyco, WorldCom etc., the issue on managerial compensation has come to the centre of debate. Top executives of those companies were granted Employee Stock Option Plan as a regular practice even when the company were making huge losses. As a result, top executives were made huge money depriving the shareholders. Top executives also used company’s fund for personal use and shareholders, the real owners of the funds were deprived. In this context, we have made an attempt to explore the interrelationships between managerial compensation, firm performance and firm characteristics parameters by studying some selected Indian automobile companies. A linear regression model that captures compensation data along with key financial performance and corporate characteristics parameters are used to explain the determinants of managerial compensation. It is found that return on capital employed, market capitalisation, firm size and debt equity are the significant determinants of managerial compensation. JEL Classification: M12, L25, G32, , M41.

 

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DOI: http://dx.doi.org/10.21088/jswm.0975.0231.11219.1

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Managerial Compensation; Firm Performance; Leverage; Accounting.

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