Bifurcation Bias in Executive Compensation and Family Firm Performance
The role of normative context in fairness and performance in family firms.
1Fairness in Family Firm Compensation
How does preferential treatment of family managers affect firm performance? This study examines the impact of compensation bias in publicly listed Chinese family firms. According to justice theories, whether family membership is perceived as a legitimate entitlement is crucial.
2The Role of Normative Context
The research shows that the negative effects of compensation bias depend on normative context. In regions with strong traditional values and firms with greater family involvement, the impact is mitigated. However, in highly competitive industries, the negative effects are amplified.
3Justice and Entitlement Theories
Drawing on justice and entitlement theories, the study explores how perceptions of family membership legitimacy shape fairness judgments. When family membership is not seen as legitimate, compensation bias more significantly harms performance.
4Family Firms in China
The study uses longitudinal data from publicly listed family firms in China. It analyzes how cash-based compensation advantages for family managers affect performance. The results highlight the critical role of normative context in these dynamics.
5Impact in Competitive Industries
In competitive industries, the negative effects of compensation bias are more pronounced. This demonstrates how industry dynamics influence managers' fairness perceptions. High competition environments make unfairness more contentious.
6Practical Recommendations
The study offers practical guidance for family firms balancing fairness and family-centric goals. Considering normative context can help firms manage compensation policies more effectively, minimizing performance losses.