Additional Analysis

4.3.1 The Roles of Major Shareholders and Foreign Investment Institution Ownership in Overseeing Managerial Entrenchment Behavior

This paper aims to examine the effect of mandatory compensation disclosure on the perfonnance-compensation relationship. Offering employee stock bonus increases the level of managerial ownership. Managers used to have a great deal of power over compensation policy making before compensation infonnation disclosure became mandatory. Under the entrenchment of managers,

106 The Jmpact 01 Employee Compensation Disclosure on Corporate Governance S，的lcture

managerial ownership exerts a negative effect on the performance-compensation relationship. Unexpectedly, this negative effect does not decrease after compensation information disc10sure is made mandatory even though the governance ability of information disc10sure is supposed to increase. We then investigate whether managerial ownership, in the presence of ownersl叩 by major shareholders or foreign investment institutions, reduces its negative effect on the performance-compensation relationshi p6. Model (4) is formed by adding major shareholders ownership to Model (3), and Model (5) by adding foreign investment institution ownership

STOC4 =.Â.v + ^À,.P E

l?t

^{+ 也Blq}+ Â.3CEQ + λ'4PEl?t *Blq +在PEI?， 牢 Blq 牢 DIS +λ'6^PERit *CEOit ^{+ λ7PERit *CEO}it ^牢DlS+ λgSlZEit ^{+~B V;t}

+λ10^{BETA iI} +ε (4)

STOC4

=

0₀ +~P E

1fr

^+02FO

I\

+B3CEQ

+禹PE~*FO~+冉PE~ *

^FO~

*

DlS

+θ'6

^PER

it

*CEOit

+ θ'7PERit *

_CEOit

*

DlS

+ θ'gSlZE

it

^{+ θ'cþ1VBV}

it

+θ10

BETA

^iI

+

^{& i (5)}

The regression results of model (4) with ROA as proxy for firm performance is displayed in Table 9. The coefficient of ROA旬的 (435.03) is positive and significant (t-stat 4.44). The coefficient of ROA *BIG*DIS (-348.44) is negative and significant (t-stat = -5.43). The results are similar to those of Model (1). Before compensation information disclosure is made mandatory, managerial ownership has a negative effect on the performance-compensation relationship (coefficient

=

-892 .3 8 ，的tat = -4.90 ),

6 Multi-collinearity problem was found among the variables of major shareholder宮，ownership^, foreign investment institutions' ownership, and managerial ownership in 血emodel.

Chiao Da Management Review Vol. 30 No. 1, 2010 107

which supports the entrenchment hypothesis. After mandatory compensation information discIosure, managerial ownership exerts a positive effect on the performance-compensation relationship (coefficient二325.87， t-stat = 2.02). The results, while supporting H8, are divergent from the empirical result ofModel (3). We suspect that information discIosure can reduce managers' self-interested behavior because major shareholders possess great incentive to monitor compensation plans 弘1andatory disclosure of bonus information facilitates major shareholders' job of overseeing compensation plans and thus improves the governance function of information disclosure. Similar empirical results are achieved either by using ROE or by using ROA as the proxy for firm performance.

Table 0 presents the regression results of model (5) with ROA as the proxy for firm performance. Before mandatory compensation information disclosure, foreign investment institution ownership has a positive effect on the performance-compensation relationship (ROA可OR coefficient = 849.87， 的tat= 15.48). The mandatory compensation information disclosure reduces the importance of foreign investment institution in monitoring the performance-compensation relationship (ROA *FOR *DIS coefficient ⁼ -4500.85, t-stat = -4^.41). The results are similar to those of model (2). Moreover, managerial ownership has a negative effect on the performance-compensation relationship (ROA *CEO coefficient = -632.46, t-stat = -3.72) before mandatory compensation information discIosure and a positive effect (ROA *CEO*DIS coefficient ⁼ 306.07, t-stat =1.8月 after mandatory discIosure. The results of model (5) are different from those of model (3). We suspect that foreign investment institutions have greater incentive to monitor managers' self-interested behavior. Mandatory discIosure makes the job of compensation oversight easier for foreign investment institutions. Mandatory disclosure thus improves the governance function of compensation information disclosure and decreases the negative effect of managerial ownership on the performance-compensation relationship

108 η'1e Jmpact of l!.ìnployee Compel1satiol1 Disclosure

011 Corporate GOl'ernal1Ce Structure

Table 9

The Effect of Major Shareholders Ownership

,

Manager Ownership and Employee Bonus information Disclosure 00 the Performance-Compensatioo Relationship:Using Return on Assets (ROA) 的 Proxyfor Firm Performance STOCKit ^{= 九+人RO~t +~BIGit} +À-;CEOit ^+À.4RO~t *BIGit ^+À-;RO~t *BIGit *DIS +λ6^ROA íI *CEO it + λ7^{ROA íI} *CEO it

*

^{DIS + λ8SIZE íI + λ9W官V}íI

+λABETA. + G.

Variables Sigo Coefficient t-statistíc

JNTERCEPT -1144997.00*** -17.14

ROA 5892.31 3.50

BIG -990.14 -0.78

CEO 6324.79** 2.19

ROA*BJG + ^{435.03*** 4.44}

ROA*BJG 呵)JS -348.44*** -5.43

ROA*CEO ? -892.38*** -4.90

ROA *CEO *DIS ? 325.87** 2.02

SJZE 73098.00*** 16.51

λ1VBV -4358.14 _{。 96}

BETA 20376.00 0.91

Adjk 0.25

F-value 48.66***

Variable defmitions 剖-egiven in Table 2. DIS，個 indicatorvariable^, equals 0 if observations are from 1998-2001 (p時-mandatorydisclosure) and equals 1 iffrom 2002-2005 (post-mandatory disclosure). (*), (**), and (***) represent being statistically significant at (0.1), (0.05), and (0.01) levels, respectively. 甘le(-statistics are based on White (1980) standard errors

Chiao Da Management Review Vol. 30 No. 1, 2010 109

Table 10

The Effect of Foreign Institutional Ownership

,

Manager Ownership

,

and Employee Bonus information Disclosure on the Performance-Compensation Relationship:Using Return on Assets (ROA) 的 Proxyfor Firm Performance

STOCKi, = θ。 +θlROAiI ^{+ θ2FORi'} + B)CEOil + θ'4^ROAi' * FORi, + θ5ROAsr*FOR'， *DIS +θ6^ROA il * CEO il + θ7 ROA it * CEO il * DIS it + θgSIZE it + θgW官 Vit

+θloBETA il + ε

Variables Sign Coefficient t-statistic

JNTERCEPT -813024.00*** -13.36

ROA ^{-3429 日**} 2.50

FOR -7610.34*** -8.01

CEO 4257.59* 1.65

ROA*FOR + ^{849.87*** 15.48}

ROA *FOR *DJS -4500.85*** -4.41

ROA*CEO ^? -632.46*** -3.72

ROA *CEO*D1S ^? 306.07* 1.85

SJZE 54763.00*** 12.80

MVBV -7658.27* -1.87

BETA 27169.00 1.39

AdjK 0.40

F-value 94.06***

Variable defmitions are given in Table 2. D時，an indicator variable^, equals 0 if observations 3I它

from 1998-2∞ 1 (pre-mandatory disclosure) and equals 1 iffrom 2002-2005 (post-mandatory disclosure). (*), (**), and (***) represent being statisticaUy significant at (0.1), (0.05), and (0.01) levels, respectively. The t-statistics are based on White (1980) standard errors.

4.3.2 Adding Employee Bonus Information Disclosure and Firm Performance of Previous Year as Independent Variables

1n Models (1), (2) and (3), we use the dummy variable of employee bonus infonnation disclosure and its interaction term with ownership structure to test the

110 ^口1elmpact of Employee Compensation Discfosure

011 Corporate Governance Structure

effect of bonus information disclosure on c。中orate governance. The dummy variable of employee bonus information disclosure is not treated as an independent variable in any of the three regression models. We then add the dummy variable of employee bonus information disclosure and firm performance of the previous year into models (l), (2) and (3) because firm performance of the previous year can impact the amount and type of employee bonus of the current year. We use ROA as the proxy for firm performance and present the regression resuIts in Table 11. The F-value of 48.68 has a significance level of 0.01 and the adjusted R² is 0.24. The coefficient of ROA*BIG (514.29) is positive and significant (的tat 4.68). After the mandatory compensation information disclosure, the coefficient of ROA *BIG*DIS (-340.55) is negative and significant (t-stat = -4.22). These resuIts are similar those resuIts of modeJ (1), providing further support for Hypotheses 1 and 2.

Table 12 displays the effect of foreign investment institution and compensation information disclosure on the performance-compensation relationship. The F-value of 105.86 has a significance level of 0.01 and the adjusted R² is 0.41. The coefficient of ROA*FOR (1096.92) is positive and significant (的tat 16.20). After the mandatory compensation information disclosure, the coefficient of ROA *FOR *DIS (-265.95) is negative and significant (t-stat = -4.72). These resuIts are similar those of Model (2), also supporting Hypotheses 3 and 4

Table 13 shows the effect of managerial ownership and compensation information disclosure on the performance-compensation relationship. The F-value of 48.77 in this model has a significance level ofO.Ol and the adjusted R² is 0.24. The coefficient of ROA *CEO (-764.34) is negative and significant (t-stat

= -4.6) after the mandatory compensation information disclosure. The coefficient of ROA *CEO*DIS (59.05) is positive but non-significant (t-stat = 0.36). These resuIts are also similar to those ofModel (3), supporting H5 but not H6

As indicated by the above analysis, adding the dummy variable of employee bonus information disclosure and co叩oration performance of the previous year as independent variables does not change the regression resuIts Major shareholders and foreign institutional investors can supervise the

Cσ'hiωaoDσ Maωnagement Rel'叩w~均台1. 30No. 1^,2010 111

perfonnance-compensation relationship before infonnation disclosure is mandatory. Mandatory information disclosure helps improve the governance function of accounting information, which then reduces the governing roles of major shareholders and foreign investment institutions. Before compensation infonnation disclosure is made mandatory, the negative effect of managerial ownership on the performance-compensation relationship suppo此s the entrenchment hypothesis. Mter mandatory, information disclosure still fails to perfonn its governance function to reduce managers' self-interested behavior

Table 11

The EfTect of Major Shareholders Ownership and Employee Bonus Information Disclosure on the Performance-Compensation Relationship:

Adding Employee Bonus Information Disclosure and Corporation Performance ofPrevious Year as Independent Variables from 1998-2001 ^(pre-mandatory disclosure) and equals 1 if from 2002-泊的(post-mandatory

disclosure). (勻， (**), and (料*) represent being statistically significant at (0.1), (0.05), and

112 The Jmpact

01

Employee Compensation Disclosure on Corporate GO^l'ernance Structure (0.01) levels, respectively. The l-statistics are based on White (1980) standard errors

Table 12

The Effect of Foreign Institutional Investors Ownership and Employee Bonus Information Disclosure on the Performance-Compensation Relationship:

Adding Employee Bonus Information Disclosure and Corporation Performance of Previous Year as Independent Variables

STOCK;r = α。+α， ROA ;r +α2^FORit +α3^D1S;r + α4ROAit * FOR;r +αsROAit * FOR^;r * DIS

Variable definitions aJ芯 givenin Table 2. D時，an indicator variable^, equals 0 if observations are from 1998-2001 (pre-mandatoI)' disclosure) aod equals 1 if from 2002-2∞5 (post-mandatoI)' disclosu記). (*), (料)，and (林*)represent being statistically significant at (0.1), (0.05), and (0.01) levels, respectively. The l-statistics are based 00 White (1980) st扭曲吋 errors

Chiao Da A1anagement Review r令1. 30 No. 1, 2010 113

Table 13

The Effect of Manager Ownership and Employee Bonus Information Disclosure on the Performance-Compensation Relationship:Adding Employee Bonus Information Disclosure and Corporation Performance of Previous Year

as Independent Variables

STOCKu = α。 +αlROAi^{/+α2CEOit +α3D1Su + α4ROAit} *CEOi/ ^+αjROAit *CEOi/ * DIS +α ROÆ.Ît-.+ α SIZE. l ' '-^'71V....~A....J it + α MVB V. + α BETÆ. ' """"'8 +&

Variables Sign Coefficient t-statistic

1NTERCEPT -1144630*** -16.92

ROA 9160.93*** 7.37

CEO 6641.27** 2.20

D1S -35561 ** -2.22

ROA*CEO ^? -764.34*** -4.6

ROA *CEO *D1S ^? 59.05 0.36

ROA ιI -710.31 _{。 82}

S1ZE 74603*** 16.20

MVBV ^-4859.29 -1.01

BETA 10981 0.48

Adj J?1 0.24

F-value 48.77***

Variable def1lÚtions are given in Table 2. ^D店，an indicator variable^, equals 0 if observations are ^{from 1998-2∞ 1} (pre-mandatory disclosure) and equals ^{1 江 from}2002-泊的(post-mandatory

disclosure). (*), (艸)， and (***) represent being statisticaUy significant at (0.1), (0.05), and (0.01)

levels, respectively. The (-statistics are based on White (1980) standard errors

114 η'1e Jmpact 01 Employee Compe^l1satio^l1 Disclosure

011 C。中orateGoverna^l1ce Structure

在文檔中 The Impact of Employee Compensation Disclosure on Corporate Governance Structure (頁 25-34)