An Empirical Analysis of Managerial Power and Executive Remuneration: Mediating Role of Firm Performance

Abstract

Managerial power is the most critical element for the organizations because it plays a vital role in firm performance and pay setting process. Moreover, top management have all important information of the firms and if managerial power is high they may misuse such information. Considering the importance of managerial power numerous studies analyzed the different aspects of managerial power using data of different countries. This study proposed three hypotheses to assess the association among managerial power, executive remuneration, and firm performance. This study used PLS-SEM approach to test developed hypotheses using data of S&P/ASX 50 index firms. All of the proposed hypotheses are accepted. This study also meet the quality criteria of both reflective and formative measurement scale as prerequisite to the assessment of structural model.

Keywords: Managerial Power, Executive Remuneration, Firm Performance, Reflective and Formative Measurement, Australia