The effect of firm performance on executive compensation in socially responsible firms: the Indian evidence

The purpose of this paper is to examine the pay-performance sensitivity in the case of socially responsible companies and test whether all the performance measures have a consistent impact across firms having different pay scales. Taking NSE Nifty 100 ESG Index as the data sample, a panel of 69 firms for 2014-2019 has been analysed using two-step system GMM and the quantile regression with panel data (QRPD) model after sample splits. The findings reveal that accounting-based firm performance indicators are more significant than the market-based measures affecting remuneration. Moreover, pay-performance sensitivity is more visible in firms paying lesser compensation, and public/private ownership status also plays a significant role in determining executive pay. Our findings are helpful to policymakers as it stresses the determinants of pay-performance sensitivity across various pay-quantiles in ESG firms.