Managerial Compensation in Multidivision Firms

• 成果类型: Article
• 署名作者: Alok, Shashwat; Gopalan, Radhakrishnan
• 署名单位: Indian School of Business (ISB); Washington University (WUSTL)
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2016.2672
• 发表日期: 2018
• 页码: 2856-2874
• 关键词: Conglomerates; division managers; incentive contracts; COMPENSATION; Executive compensation; MANAGER; divisions; business segments; corporate governance

摘要

Using hand-collected data on division manager (DM) pay contracts, we document that DM pay is related to the performance of both the DM's division and the other divisions in the firm. There is substantial heterogeneity in DM pay for performance. DM pay for division performance is lower in industries with less informative accounting earnings. DM pay is more sensitive to other-division performance if the DM's division is related to the rest of the firm, if the DM's division has fewer growth opportunities, and if the DM's division receives less capital from the rest of the firm. Consistent with optimal contracting view, DMs receive greater pay for other-division performance in better-governed firms. Overall, our evidence suggests that DM compensation is structured to account for the information and agency problems in multidivision firms.