The impact of chief executive officer’s compensation on agency costs: The role of good corporate governance

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Abstract

Exploring the interplay between managerial compensation, agency costs, and corporate governance, this study investigates how chief executive officer (CEO) duality (combined CEO and chairman roles) moderates the relationship. Using data from Vietnamese listed industrial firms (2013–2022), the research reveals that under weak governance (CEO duality), compensation has no significant impact on agency costs. However, with strong governance (separate CEO and chairman roles), compensation’s influence on agency costs weakens. Building on this analysis, the study proposes recommendations for enhancing corporate governance practices and mitigating the influence of remuneration on agency problems.

Keywords: Agency Cost, Executive Compensation, Corporate Governance, Duality

Authors’ individual contributions: Conceptualization — T.T.P. and N.T.K.; Methodology — T.T.P. and N.V.A..; Software — T.P.L., N.V.A., and D.K.C.; Formal Analysis — T.T.P., N.V.A., and D.K.C.; Investigation— N.T.K. and N.V.A.; Resources— L.Q.C. and P.H.G.; Data Curation — N.T.M.N.; Writing — Original Draft — T.T.P. and N.V.A.; Writing — Review & Editing — T.T.P. and N.T.K.; Visualization — N.V.A.; Supervision — T.T.P.; Project Administration — T.T.P.; Funding Acquisition — T.T.P.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: M10, M20, M52

Received: 21.03.2024
Accepted: 16.07.2024
Published online: 19.07.2024

How to cite this paper: Phuong, T. T., Long, T. P., Kien, N. T., Anh, N. V., Chi, D. K., Chi, L. Q., Giang, P. H., & Nguyet, N. T. M. (2024). The impact of chief executive officer’s compensation on agency costs: The role of good corporate governance. Corporate Board: Role, Duties and Composition, 20(2), 34–41. https://doi.org/10.22495/cbv20i2art4