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Compensation of top brass, corporate governance and performance of the Indian family firms – an empirical study

Palanisamy Saravanan (Department of Finance and Accounting, Indian Institute of Management Shillong, Shillong, India)
Maram Srikanth (Department of Finance, IIM Shillong, Shillong, India)
Suhas M. Avabruth (Department of Finance and Accounting, Indian Institute of Management Shillong, Shillong, India)

Social Responsibility Journal

ISSN: 1747-1117

Article publication date: 7 August 2017

Abstract

Purpose

The objective of this study is to understand the linkages among executive compensation, corporate governance and performance of the Indian family and non-family firms. Further, the study also analyzes the level of shareholding pattern of the Indian family firms on their performance and the executive compensation.

Design/methodology/approach

The authors have collected panel data of the companies listed on the National Stock Exchange of India Limited. The data set consists of 284 companies (both family and non-family) for the period 2005–2014. The authors have made use of a dynamic panel data model with generalized method of moments (GMM) estimation to formulate the hypotheses and used fixed-effects regression model to check the robustness of our findings.

Findings

The authors find support for the agency theory, stewardship theory and resource dependence theory in the paper. Specifically, variables related to executive compensation, corporate governance (board size, proportion of independent directors on board, chief executive officers duality and other directorships held by the executive directors outside the company), firm performance (Tobin’s Q), leverage and shareholding pattern of the family are significant in this study.

Practical implications

The study has practical implications for all stakeholders of the family and non-family firms, especially in the emerging market economies. It can be used as a reference guide by various other stakeholders of the family firms, viz., customers, educators, tax authorities, government and society.

Originality/value

The authors confirm that their research is original and provides valuable insights on the Indian family firms. The authors study cross-holding of directorships, inter alia, in the Indian family business groups. As most of the previous studies in the Indian context ignored this important aspect, this study is unique in nature.

Keywords

Citation

Saravanan, P., Srikanth, M. and Avabruth, S.M. (2017), "Compensation of top brass, corporate governance and performance of the Indian family firms – an empirical study", Social Responsibility Journal, Vol. 13 No. 3, pp. 529-551. https://doi.org/10.1108/SRJ-03-2016-0048

Publisher

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Emerald Publishing Limited

Copyright © 2017, Emerald Publishing Limited