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Executive bonus compensation and financial leverage: do growth and executive ownership matter?

Adu-Ameyaw, E, Danso, A, Acheampong, S and Akwei, CA (2021) Executive bonus compensation and financial leverage: do growth and executive ownership matter? International Journal of Accounting and Information Management. ISSN 1834-7649

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Abstract

Purpose: This study aims to examine the impact of executive bonus compensation on a firm’s financial leverage policy and the extent to which this compensation–leverage relation is moderated by firm growth and executive ownership.
Design/methodology/approach: Using data from 213 non-financial and non-utility UK FTSE 350 firms for the period 2007–2015, generating a total of 1,784 firm-year observations, panel econometric methods are used to test the model.
Findings: Drawing insights from agency theoretic view, this paper uncovers that managerial cash bonus compensation is negatively and significantly related to financial leverage. However, stock bonus compensation has a positive and significant impact on leverage. This study also observes that compensation–leverage is moderated by both firm growth and executive ownership. The results remain robust to alternative econometric models.
Originality/value: While this paper builds on the risk-motivated argument of executive bonus compensation literature, it is the first – to the best of the knowledge – to explore the bonus compensation-corporate financial leverage and, particularly, examine the extent to which firm growth and corporate executive ownership matter in this relationship.

Item Type: Article
Additional Information: This author accepted manuscript is deposited under a Creative Commons Attribution Non-commercial 4.0 International (CC BY-NC) licence. This means that anyone may distribute, adapt, and build upon the work for non-commercial purposes, subject to full attribution. If you wish to use this manuscript for commercial purposes, please contact permissions@emerald.com
Uncontrolled Keywords: 0806 Information Systems, 1501 Accounting, Auditing and Accountability, 1502 Banking, Finance and Investment
Subjects: H Social Sciences > HF Commerce > HF5001 Business
H Social Sciences > HF Commerce
Divisions: Doctoral Management Studies (new Sep 19)
Publisher: Emerald
Date Deposited: 24 May 2021 09:53
Last Modified: 24 May 2021 10:00
DOI or Identification number: 10.1108/ijaim-09-2020-0141
URI: https://researchonline.ljmu.ac.uk/id/eprint/15046

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