This empirical work of the relation between compensation and firm performance is
extensively studied in the study. We also examined the determinants for stock option
compensation. Through inspecting these issues, we provided a comprehensive
examination of compensation in Taiwan. First, this study examined the determinants
for ESOs and stock bonus in Taiwan. The results indicated that firms with larger size
or high growth opportunity tended to adopt the stock bonus for their executives to
reduce agency costs. This study also presented empirical evidence on the association
between stock bonus and firm performance. Regression results revealed a positive
relationship between stock bonus and the firm’s operating performance. We also found
that stock bonus payments have a lagged effect on subsequent firm performance.
Thus, it can be seen that the results are consistent with the argument that stock bonus
payments motivate not only the CEO to work in the interests of the firm’s shareholders,
i.e. to improve firm performance, and attract and retain talented executives.