The Relationship Between Managerial Compensation and Idle Capacity Expense: the Role of the Board of Directors

Abstract

The objective of this study is to explore the relationship between managerial compensation and idle capacity expense Taiwan’s Standards of Financial Accounting Statement (SFAS) No 10 ”Inventories” regulates that unallocated fixed overhead should be expensed and has became effective since 2009 I first examine whether managerial compensation is shielded from idle capacity expense Next I examine the effect of corporate governance quality on the relationship between idle capacity cost and compensation Using the sample of Taiwan listed companies over the period of 2009-2012 this study finds that the phenomenon of downward adjusted the weight of idle capacity expense on compensation contracts is existed Further I also find that the phenomenon of downward adjusted the weight on compensation contracts is more obvious with the higher quality of compensation committee than the board of directors

Date of Award	2014 Jul 16
Original language	English
Supervisor	Chaur-Shiuh Young (Supervisor)