Does nepotism run in the family? CEO pay and pay-performance sensitivity in Indian family firms
Date
2021
Authors
Chen, Guoli
Chittoor, Raveendra
Vissa, Balagopal
Journal Title
Journal ISSN
Volume Title
Publisher
Strategic Management Journal
Abstract
Using a principal-principal agency theory lens we examine corporate governance and compensation design in family-owned businesses. We conceptualize how CEO pay and pay-performance sensitivity is influenced by whether the CEO is a professional or drawn from the controlling family (family CEO). Data from a sample of 277 publicly listed Indian family firms during 2004-2013 support our argument that family CEOs get paid more than professional CEOs. This pattern is stronger in superior-performing firms that are named after the controlling family (eponymous firms). Furthermore, family CEOs of superior-performing firms have higher pay-performance sensitivity compared to professional CEOs of other superior- performing firms. Our findings reveal nuanced heterogeneity in nepotism in emerging economy family firms – CEO compensation is a mechanism for some controlling families to tunnel corporate resources.
Description
Keywords
business groups, CEO compensation, emerging markets, familyfirms, pay-performance sensitivity
Citation
Chen, G., Chittoor, R., and Vissa, B. (2021). Does nepotism run in the family? CEO pay and pay-performance sensitivity in Indian family firms, Strategic Management Journal, 42(7), 1326-1343. https://doi.org/10.1002/smj.3263.