The Sustainable Growth of Korean Listed Firms in the lens of Pay Disparity and Managerial Overconfidence

Hansol Lee; Kevin Troy Chua; Minsang Lee

doi:10.36923/iefrontiers.v27i2.273

Open Access Article Finance

Hansol Lee ⁽¹⁾, Kevin Troy Chua ⁽²⁾, Minsang Lee ⁽³⁾

(1) Department of Accounting, Kangwon National University, South Korea, Korea, Republic of,

(2) Department of Accounting, Kangwon National University, South Korea, Korea, Republic of,

(3) Future Policy Development Institute, South Korea, Korea, Republic of

https://doi.org/10.36923/iefrontiers.v27i2.273

Issue
Vol. 27 No. 2 (2024): Continuous

Submitted
August 23, 2024

Published
November 5, 2024

Keywords:

Pay Disparity, Sustainable Growth, Compensation, Firm Performance, Managerial Overconfidence

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Abstract

This study aims to assess the impact of pay disparity on the sustainable growth of listed firms in Korea, and to explore how this relationship is influenced by the presence of managerial overconfidence. Employing a fixed-effects regression model, the analysis draws on 10,244 firm-year observations from Korean-listed firms between 2012 and 2022. The findings reveal a significant positive association between pay disparity and the sustainable growth of firms, supporting the tournament theory, Moreover, this effect is more pronounced in companies led by overconfident management. The robustness tests also confirm the main regression results. This study highlights how pay disparity together with the presence of managerial overconfidence can drive sustainable growth. It recommends tailored compensation strategies that consider management dynamics and organizational context, helping firms navigate compensation challenges and enhance long-term success and competitive advantage. The study provides valuable insights for policymakers, investors, and other stakeholders in crafting equitable compensation practices that promote resilient and sustainable business environments. This study’s originality lies in its consideration of managerial overconfidence, setting it apart from prior research that primarily examines the direct link between pay disparity and sustainable growth.

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Authors

Hansol Lee

Department of Accounting, Kangwon National University, South Korea

https://orcid.org/0000-0001-6776-410X

hlee@kangwon.ac.kr (Primary Contact)

Kevin Troy Chua

Department of Accounting, Kangwon National University, South Korea

https://orcid.org/0009-0008-0551-4517

Minsang Lee

Future Policy Development Institute, South Korea

https://orcid.org/0000-0001-6776-410X

Author Biographies

Hansol Lee, Department of Accounting, Kangwon National University, South Korea

Dr. Lee is an Assistant Professor of Accounting at Kangwon National University in South Korea. His research interests encompass internal control, corporate governance, ESG, and financial accounting. He holds a Ph.D. in Accountancy.

Kevin Troy Chua, Department of Accounting, Kangwon National University, South Korea

Kevin is a Ph.D. Candidate in Business Administration with a concentration in advanced studies in Accounting at Kangwon National University in South Korea. His research interests include ESG Sustainability, Corporate Governance, Managerial Practices, and Financial Accounting. He holds both a BS in Accountancy and a Master’s degree in Accountancy. Back in Manila, Philippines, he is a Certified Public Accountant (CPA), a Certified Tax Technician (CTT) and a Certified Payroll Professional (CPP). He previously served as an Associate for Client Accounting Services at PricewaterhouseCoopers (PwC) Philippines. He is also a lecturer of courses in Financial Accounting, Cost Accounting, and Managerial Accounting for seven (7) years.

Minsang Lee, Future Policy Development Institute, South Korea

Dr. Lee is the Director of the Future Policy Development Institute in South Korea. His research interests include management, managerial practices, marketing, and distribution. He holds a Ph.D. in Management and previously served as a professor at Hyupsung University in South Korea.

Lee, H., Chua, K. T., & Lee, M. (2024). The Sustainable Growth of Korean Listed Firms in the lens of Pay Disparity and Managerial Overconfidence. Innovation Economics Frontiers, 27(2), 124–139. https://doi.org/10.36923/iefrontiers.v27i2.273

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