Remuneration committees, executive remuneration, and firm performance in Indonesia
Iman Harymawan1, Dian Agustia1, Mohammad Nasih1
1Universitas Airlangga, Jalan Airlangga 4-6, Gubeng, Surabaya 60115, Indonesia.
Abstract:
Indonesia is currently in the process of mandating the establishment of Remuneration Committees (RCs) for all listed companies. However, little is known about the effectiveness of RCs in Indonesia. This study sheds light on this issue, by examining the relationships between RCs, executive and board of director remuneration, and firm performance in Indonesia. This study uses 847 observations of firms listed on the Indonesian Stock Exchange (IDX) during 2014-2017. Our results indicate that RCs are positively related to executives remuneration and firm performance. In particular, higher remuneration is only linked to higher performance in firms that have established a remuneration committee. This study documents the interactions between RCs, remuneration levels of senior company officers and firm performance in an emerging market setting with voluntary formation of RCs. This study has implications for regulators and company management in Indonesia (and other emerging markets), as the existence of remuneration committees is found to be associated with more effective remuneration packages and higher firm performance.
More Related Videos
08:40Quantifying Arms and Legs Contributions during Repetitive Electrically-Assisted Sit-To-Stand Exercise in Paraplegics: A Pilot Study
Published on: November 11, 2022
06:00Author Spotlight: Development of a Smartphone-Enhanced Paper-Based Device for Rapid Dengue NS1 Detection
Published on: January 26, 2024
Related Concept Videos
01:28Compensation Mechanisms
Respiratory Compensation
This mechanism addresses metabolic-induced pH imbalances by adjusting breathing rates. Respiratory compensation begins within minutes of detecting a pH...
01:26Equity Theory
01:01Production Efficiency
01:09Decision Making: P-value Method
First, a specific claim about the population parameter is proposed. The claim is based on the research question and is stated in a simple form. Further, an opposing statement to the claim is also stated. These statements can act as null and alternative hypotheses: a null hypothesis would be a neutral statement while the alternative hypothesis can...
01:20Actuarial Approach
Consider the example of a high-risk surgical procedure with significant early-stage mortality. A two-year clinical study is conducted,...
01:14Decision Making: Traditional Method
First, a specific claim about the population parameter is decided based on the research question and is stated in a simple form. Further, an opposing statement to this claim is also stated. These statements can act as null and alternative hypotheses, out of which a null hypothesis would be a...