Graduation Year

2022

Date of Submission

12-2022

Document Type

Campus Only Senior Thesis

Degree Name

Bachelor of Arts

Department

Economics

Reader 1

Julio Garin

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2022 Kyung M Koo

Abstract

This study examines the impact the effects that executive compensation has on firm performance in Korean conglomerates. The study uses data on ROA, ROE, and total revenue as measures of firm performance on a subset of 39 publicly-traded Korean firms through the period of 2014-2022. Using the data obtained on firm performance as the dependent variable, the study uses a fixed effects regression model with mean differencing using three different factors of individual executive’s compensation at each respective firm to ultimately estimate the relationship between the firm performance measures and executive compensation. The study finds that there is a positive correlation between ROA and ROE on performance-incentive compensation of individual executives. The study also shows that there is no significant correlation between the components of total compensation and base salary with respect to ROA, ROE, or total revenue. Finally, the study shows that there is also no significant correlation between total revenue and any aspect of executive compensation. The study concludes that along with similar research done on the topic of executive compensation, performance-incentive compensation practices are most efficient at increasing firm performance with respect to executive compensation.

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