Does Executive Compensation Negatively Affect Firm Performance in a Crisis?
Summary
The goal of this research is to assess the effect of types of executive compensation on firm
performance in the recent COVID-19 crisis in the Netherlands. The reason for this is that
good corporate governance mechanisms depend on organizational and environmental
circumstances, which differed during the COVID-19 crisis. Hence, this research answers the
following research question: ‘What is the role of certain forms of executive compensation on
firm performance during the COVID-19 crisis in the Netherlands?’. The research has been
conducted using a fixed-effects regression analysis from panel data about the Netherlands’ 67
largest listed firms. It can be concluded that incentive executive compensation positively
impacts return on equity during crisis times. Furthermore, total executive compensation
negatively impacts Tobin’s Q during crisis times. However, most effects of types of executive
compensation on firm performance were non-significant in crisis times. Thus, if firms want to
alter their executive compensation, they should apply incentive-style compensation structures
to improve firm performance during crisis times.