Effect of SME’s Managerial Ability and Executive Compensation on Firm Value

This paper analyzes the impact of the managerial ability and level of compensation on firm value in small and medium enterprises. The ability of managers is important for the sustainability and growth of small and medium enterprises because they lack awareness of resources, technology, and reputatio...

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Autores principales:	Won Park, Chunggyu Byun
Formato:	article
Lenguaje:	EN
Publicado:	MDPI AG 2021
Materias:	small and medium enterprise (SMEs) managerial ability executive compensation firm value CEO’s role Environmental effects of industries and plants TD194-195 Renewable energy sources TJ807-830 Environmental sciences GE1-350
Acceso en línea:	https://doaj.org/article/a8039dafe1e24d448b092e2266f9201d
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spelling	oai:doaj.org-article:a8039dafe1e24d448b092e2266f9201d2021-11-11T19:31:27ZEffect of SME’s Managerial Ability and Executive Compensation on Firm Value10.3390/su1321118282071-1050https://doaj.org/article/a8039dafe1e24d448b092e2266f9201d2021-10-01T00:00:00Zhttps://www.mdpi.com/2071-1050/13/21/11828https://doaj.org/toc/2071-1050This paper analyzes the impact of the managerial ability and level of compensation on firm value in small and medium enterprises. The ability of managers is important for the sustainability and growth of small and medium enterprises because they lack awareness of resources, technology, and reputation compared to large enterprises. The managerial ability is the ability to efficiently utilize resources and choose the investment plan with the highest future net cash flows. Managerial ability is also an indicator of the level of compensation for executives. Therefore, the level of executive compensation can help a firm value or growth if it is based on managerial abilities. In addition, high executive compensation standards can be an opportunity or motivation to work hard for the wealth of companies and shareholders. We analyzed 1872 small and medium-sized companies listed on the Korean stock market to achieve the purpose of the research. We analyzed the accounting period of 6 years from 2012 to 2017. Our results have had a positive impact on firm value with executive compensation. In groups with excellent managerial skills, executive compensation has had a positive (+) impact on firm value. However, executive compensation did not have a significant impact on firm value in groups with poor managerial skills. These results validate that the CEO’s role in small and medium enterprise is important and that the level of compensation for executives is important to motivate. It also suggests that executive compensation cannot affect the firm value in groups with low managerial abilities.Won ParkChunggyu ByunMDPI AGarticlesmall and medium enterprise (SMEs)managerial abilityexecutive compensationfirm valueCEO’s roleEnvironmental effects of industries and plantsTD194-195Renewable energy sourcesTJ807-830Environmental sciencesGE1-350ENSustainability, Vol 13, Iss 11828, p 11828 (2021)
institution	DOAJ
collection	DOAJ
language	EN
topic	small and medium enterprise (SMEs) managerial ability executive compensation firm value CEO’s role Environmental effects of industries and plants TD194-195 Renewable energy sources TJ807-830 Environmental sciences GE1-350
spellingShingle	small and medium enterprise (SMEs) managerial ability executive compensation firm value CEO’s role Environmental effects of industries and plants TD194-195 Renewable energy sources TJ807-830 Environmental sciences GE1-350 Won Park Chunggyu Byun Effect of SME’s Managerial Ability and Executive Compensation on Firm Value
description	This paper analyzes the impact of the managerial ability and level of compensation on firm value in small and medium enterprises. The ability of managers is important for the sustainability and growth of small and medium enterprises because they lack awareness of resources, technology, and reputation compared to large enterprises. The managerial ability is the ability to efficiently utilize resources and choose the investment plan with the highest future net cash flows. Managerial ability is also an indicator of the level of compensation for executives. Therefore, the level of executive compensation can help a firm value or growth if it is based on managerial abilities. In addition, high executive compensation standards can be an opportunity or motivation to work hard for the wealth of companies and shareholders. We analyzed 1872 small and medium-sized companies listed on the Korean stock market to achieve the purpose of the research. We analyzed the accounting period of 6 years from 2012 to 2017. Our results have had a positive impact on firm value with executive compensation. In groups with excellent managerial skills, executive compensation has had a positive (+) impact on firm value. However, executive compensation did not have a significant impact on firm value in groups with poor managerial skills. These results validate that the CEO’s role in small and medium enterprise is important and that the level of compensation for executives is important to motivate. It also suggests that executive compensation cannot affect the firm value in groups with low managerial abilities.
format	article
author	Won Park Chunggyu Byun
author_facet	Won Park Chunggyu Byun
author_sort	Won Park
title	Effect of SME’s Managerial Ability and Executive Compensation on Firm Value
title_short	Effect of SME’s Managerial Ability and Executive Compensation on Firm Value
title_full	Effect of SME’s Managerial Ability and Executive Compensation on Firm Value
title_fullStr	Effect of SME’s Managerial Ability and Executive Compensation on Firm Value
title_full_unstemmed	Effect of SME’s Managerial Ability and Executive Compensation on Firm Value
title_sort	effect of sme’s managerial ability and executive compensation on firm value
publisher	MDPI AG
publishDate	2021
url	https://doaj.org/article/a8039dafe1e24d448b092e2266f9201d
work_keys_str_mv	AT wonpark effectofsmesmanagerialabilityandexecutivecompensationonfirmvalue AT chunggyubyun effectofsmesmanagerialabilityandexecutivecompensationonfirmvalue
_version_	1718431485644505088

Effect of SME’s Managerial Ability and Executive Compensation on Firm Value

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