Open Access Article Finance

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

Authors

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

  1. Department of Accounting, Kangwon National University, South Korea
  2. Department of Accounting, Kangwon National University, South Korea
  3. Future Policy Development Institute, South Korea

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

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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.

Article information

Keywords
Pay DisparitySustainable GrowthCompensationFirm PerformanceManagerial Overconfidence
Section
Articles
Issue
Vol. 27 No. 2 (2024)
Submitted
August 23, 2024
Published
November 5, 2024
Corresponding author
Hansol Lee
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How to Cite

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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