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All Journal Journal of Economics, Business, & Accountancy Ventura eJEBA
Maulana, Afandi Ukik Wahyu Bintang
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Decision Sciences, Operations Research & Management Economics, Econometrics & Finance

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Financial Leverage and Managerial Compensation: Evidence from Non-Cyclical Industries in Indonesia Farihah, Elva; Hartadinata, Okta Sindhu; Maulana, Afandi Ukik Wahyu Bintang
Journal of Economics, Business, and Accountancy Ventura Vol. 26 No. 3 (2023): December 2023 - March 2024
Publisher : Universitas Hayam Wuruk Perbanas

Show Abstract | Download Original | Original Source | Check in Google Scholar | DOI: 10.14414/jebav.v26i3.3963

Abstract

This research analyzes the impact of financial leverage on managerial compensation. This study also explores the moderating effect of financial distress on the link between financial leverage and managerial compensation. This study used a quantitative approach with multi-linear regression analysis. The sample consisted of 26 firms from non-cyclical industries listed on the Indonesian Stock Exchange (IDX) from 2018 to 2022, with a total observation of 130. The data research was derived from firms' annual reports. The empirical result shows that financial leverage positively affects managerial compensation. It suggests that firms incentivize management with higher compensation, aiming for more professional leverage management to maximize firm value. This finding is relevant to the trade-off theory. This study also demonstrates that the variable of financial distress is categorized as a pure moderator. It is confirmed that financially distressed firms determine financial leverage as a negotiation tool to reduce the cost of salaries. This finding implies the importance of the firms carefully balancing human capital and compensation schemes because the manager's interest might be given up if the company is in financial distress.
The Role of Financial Distress in Moderating the Relationship Between Financial Leverage and Key Management Compensation in Consumer Cyclical Sector Utomo, Ginaris Prio; Maulana, Afandi Ukik Wahyu Bintang; Sridadi, Ahmad Rizki
e-Journal Ekonomi Bisnis dan Akuntansi Vol. 12 No. 1 (2025): e-JEBA Volume 12 Number 1 Year 2025
Publisher : UPT Penerbitan Universitas Jember

Show Abstract | Download Original | Original Source | Check in Google Scholar | DOI: 10.19184/ejeba.v12i1.53696

Abstract

This research investigates the effect of financial leverage on the compensation of top executives and how financial distress mediates this relationship. A quantitative method with multiple and moderated regression analyses was applied to test the hypothesis using the data of 24 consumer cyclical companies listed in the Indonesia Stock Exchange from 2018 to 2022. The results indicate that financial leverage significantly and positively influences the key management compensation, and thus, the higher levels of debt leads to higher compensation for managers. The results also show that financial distress significantly moderates this relation, which negatively affects the linkage of executive compensations and leverage. This moderation suggests that in financial distress, firms might cut down on management compensation as a response to the increased risks associated with high leverage. These findings contribute valuable insights into capital structure and compensation strategies, especially in different financial contexts, and provide practical recommendations for corporate leaders in designing executive pay.
Financial Leverage and Managerial Compensation: Evidence from Non-Cyclical Industries in Indonesia Farihah, Elva; Hartadinata, Okta Sindhu; Maulana, Afandi Ukik Wahyu Bintang
Journal of Economics, Business, and Accountancy Ventura Vol. 26 No. 3 (2023): December 2023 - March 2024
Publisher : Universitas Hayam Wuruk Perbanas

Show Abstract | Download Original | Original Source | Check in Google Scholar | DOI: 10.14414/jebav.v26i3.3963

Abstract

This research analyzes the impact of financial leverage on managerial compensation. This study also explores the moderating effect of financial distress on the link between financial leverage and managerial compensation. This study used a quantitative approach with multi-linear regression analysis. The sample consisted of 26 firms from non-cyclical industries listed on the Indonesian Stock Exchange (IDX) from 2018 to 2022, with a total observation of 130. The data research was derived from firms' annual reports. The empirical result shows that financial leverage positively affects managerial compensation. It suggests that firms incentivize management with higher compensation, aiming for more professional leverage management to maximize firm value. This finding is relevant to the trade-off theory. This study also demonstrates that the variable of financial distress is categorized as a pure moderator. It is confirmed that financially distressed firms determine financial leverage as a negotiation tool to reduce the cost of salaries. This finding implies the importance of the firms carefully balancing human capital and compensation schemes because the manager's interest might be given up if the company is in financial distress.
Co-Authors Ahmad Rizki Sridadi Elva Farihah Hartadinata, Okta Sindhu Utomo, Ginaris Prio