Managerial compensation in India: a test of alternative models

Abstract

This study attempts to econometrically model the determinants of managerial compensation in the Indian economy making use of a pooled cross-section and time-series data base that consists of 157 managers from eight companies for the time period 1977-97. The paper tests for the empirical validity of four alternative models/explanations of corporate compensation: firm performance, managerial discretionary power, human capital, and the tournament-based pay structure. The earning equations are developed for testing the various hypotheses and a generalised linear regression framework is used for analysing the data.