Review of Corporate Finance > Vol 1 > Issue 1-2

Executive Compensation and Deployment of Corporate Resources: Evidence from Working Capital

Nihat Aktas, WHU Otto Beisheim School of Management, Germany, , Ettore Croci, Universita Cattolica del Sacro Cuore, Italy, , Oguzhan Ozbas, The Central Bank of the Republic of Turkey, Turkey, , Dimitris Petmezas, Durham University Business School, UK,
Suggested Citation
Nihat Aktas, Ettore Croci, Oguzhan Ozbas and Dimitris Petmezas (2021), "Executive Compensation and Deployment of Corporate Resources: Evidence from Working Capital", Review of Corporate Finance: Vol. 1: No. 1-2, pp 43-80.

Publication Date: 29 Apr 2021
© 2021 N. Aktas, E. Croci, O. Ozbas and D. Petmezas
Corporate finance
Working capitalbonus paymentexecutive compensationfinancial constraint


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In this article:
1. Introduction 
2. Data and Empirical Strategy 
3. Sensitivity of Executive Compensation to Working Capital Performance 
4. Additional Results and Robustness Checks 
5. Conclusion 


Firms provide compensation incentives to executives, primarily in the form of bonus payments, to alleviate slack in the deployment of corporate resources to working capital. Financially constrained firms are heavy users of working capital incentives. So are firms that are less exposed to external takeover threats. Among the different components of working capital, inventories and payables are the main drivers of executive bonuses. Overall, our evidence supports the optimal contracting view of bonus payments in executive compensation.