Wang, R; Lee, C J; Hsu, S C and Chen, J H (2021) Preventing or encouraging illegal activities by construction firms: Effects of top management team compensation and aspiration-performance discrepancies. Engineering, Construction and Architectural Management, 28(6), pp. 1739-1760. ISSN 0969-9988
Abstract
Purpose: Corporate illegal activities may result in fatal injuries and economic losses and have been widely reported in the construction industry. This study is to investigate the relationship between top management team (TMT) compensation and corporate illegal activities with the moderating effects of aspiration–performance discrepancies. Design/methodology/approach: Using a multi-year sample of Chinese construction firms from 2011 to 2017, this paper employed a hierarchical logit regression model with fixed effects. Findings: This study indicates that TMT compensation is positively related to the likelihood of corporate illegal activities. It also finds performance higher than aspirations would lower the probability of illegal activities while performance lower than aspirations also decreases the occurrence of illegal behaviors. Finally, the positive relationship between TMT compensation and illegal activities is strengthened by aspiration–performance discrepancies. Practical implications: It recommended the design of executive compensation may need to be reconsidered. Next, companies need to carefully monitor top management team, especially when performance is lower than the desired level. Finally, debt-to-equity ratio deserves more attention for Chinese construction firms in suppressing illegal activities. Originality/value: Given the mixed effects of TMT compensation, this study confirms its positive impact on corporate illegal behaviors. Consistent with the behavioral theory of the firm, it unveils the direct and moderating effects of aspiration-performance discrepancies. The findings are beneficial for evaluating firms' performance and considering the prevention of corporate fraudulent activities.
| Item Type: | Article |
|---|---|
| Uncontrolled Keywords: | aspiration; compensation; corporate illegal activities; performance; top management team |
| Index terms: | compensation, prevention, construction industry, executive, regression model, methodology, top management team, construction firm, injury, theory of the firm |
| Subjects: | health conditions and diseases, industry analysis, statistical analysis, management, economics, research methods, financial risk, organization, practitioner, dispute resolution |
| Topics: | Health and Safety, Business Strategy, Cost Management, Research Practice, Roles and Professions, Legal Issues, Organizational Design |
| Descriptive scope: | 4 PCTA |
N.B. Descriptive scope is a count of how many of the five facets of empirical research are indicated by the words used in title, abstract and keywords. It is not intended as a judgement on the research; merely a count of the kind of word we would expect to indicate Phenomenon, Concepts, Theoretical framing, Empirical techniques, Analytical techniques. If all five are present, then a code of “5 PCTEA” will indicate this. If you feel the coding for this record is questionable, we welcome discussion around the terms we matched or the way we categorized them. The facet you would expect may not be coded, or a facet may be coded inappropriately. This can also bear on a larger question, of which facets should be treated as defining in construction management research. Please get in touch, and we will look at it. More details here