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Utomo, Ginaris Prio
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Decision Sciences, Operations Research & Management Economics, Econometrics & Finance

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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.
Co-Authors Ahmad Rizki Sridadi Maulana, Afandi Ukik Wahyu Bintang