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Korean Academic Society of Business Administration
[ Article ]
korean management review - Vol. 52, No. 2, pp.365-390
ISSN: 1226-1874 (Print)
Print publication date 30 Apr 2023
Received 19 Sep 2022 Revised 24 Jan 2023 Accepted 31 Jan 2023
DOI: https://doi.org/10.17287/kmr.2023.52.2.365

주요 고객사의 장기 인센티브와 공급사의 성과

Sohee Park ; Sun-Moon Jung
(First Author) Seoul National University psh9263@snu.ac.kr
(Corresponding Author) Dongguk University sunmoonjung@dongguk.edu
Major Customers’ Long-term CEO Incentives and Supplier’s Performance


Copyright 2011 THE KOREAN ACADEMIC SOCIETY OF BUSINESS ADMINISTRATION
This is an open access article distributed under the terms of the Creative Commons Attribution License 4.0, which permits unrestricted, distribution, and reproduction in any medium, provided the original work is properly cited.

Abstract

This paper examines the relationship between major customers’ long-term CEO incentives and supplier firms’ performance. Long-term equity incentives encourage CEOs to pursue relatively long-time horizons, potentially influencing certain relationships with slanted bargaining power. We predict and find that major customers’ long-term CEO incentives, as measured by CEO incentive for unvested equity, are positively associated with supplier firms’ profitability, partially through a reduced emphasis on myopic price-cuts. However, we also find that customers’ equity incentives appear to decrease suppliers’ operational efficiencies and cost elasticity, implying that suppliers bear burdens of implementing stable resource supplies in exchange for the price protection from the customers. Collectively, our results suggest that customers’ long-term incentives may have multifaceted consequences on suppliers’ performance and operations.

Keywords:

long-term incentive, supply chain, spillover effect, major customer

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∙ The author Sohee Park is a doctoral student at the business school of Seoul National University. She earned her bachelor's and master's degrees from the same university. After graduating from the undergraduate program, she worked as a junior economist in the Financial Stability Department of the Bank of Korea, and later worked as a project manager at an IT startup. She is majoring in accounting in graduate school and is conducting research on topics related to the incentive structure and dynamics among key participants in the capital market.

∙ The author Sun-Moon Jung is currently working as an assistant professor in the Department of Accounting at Dongguk University's Dongguk Business School. She received a Bachelor's degree in Business Administration from Korea University, and Master's and Doctoral degrees in Business Administration from Seoul National University's Graduate School of Business. Since obtaining her doctoral degree, she has been employed at Dongguk University. Her main research areas include performance measurement, performance management, incentive systems, goal setting, budget systems, and corporate governance.