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The Compensation-Crash Link: Exploring How Managerial Pay Affects Stock Price Stability in Indonesia

Mustika Winedar & Bambang Tjahjadi

Compensation & Benefits Review2025https://doi.org/10.1177/08863687251348556article
ABDC C
Weight
0.37

What the paper says

This study aims to analyse the impact of managerial compensation on the risk of company stock price crashes, specifically within the Indonesian market. Using OLS regression, it examines how the presence of a remuneration committee influences this relationship. The findings reveal that executive compensation (EXEPAY) significantly reduces the risk of stock price crashes, as measured by NCSKEW and DUVOL, while board compensation (DIRPAY) and total executive and board compensation (EDPAY) have no significant effect. Furthermore, the oversight provided by the remuneration committee strengthens the negative relationship between executive compensation and crash risk, suggesting it helps curb managerial opportunism and mitigate stock price crashes. These results offer valuable insights for investors, highlighting the importance of remuneration committees in shaping compensation practices that support stock price stability. However, the study’s focus on Indonesia may limit the generalizability of its findings to other countries or contexts.

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https://doi.org/https://doi.org/10.1177/08863687251348556

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@article{mustika2025,
  title        = {{The Compensation-Crash Link: Exploring How Managerial Pay Affects Stock Price Stability in Indonesia}},
  author       = {Mustika Winedar & Bambang Tjahjadi},
  journal      = {Compensation & Benefits Review},
  year         = {2025},
  doi          = {https://doi.org/https://doi.org/10.1177/08863687251348556},
}

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Evidence weight

0.37

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact0.16 × 0.4 = 0.06
M · momentum0.53 × 0.15 = 0.08
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

† Text relevance is estimated at 0.50 on the detail page — for your query’s actual relevance score, open this paper from a search result.