Foreign Investors and Compensation Committee

We analyze the effect of the foreign investor’s share on the adoption of compensation committee. At the same time, we investigate the effects of foreign investor’s share on the independence, expertise, and comprehensive measure of the compensation committee. Using 6,829 firm-year data for non-financial companies listed on the Korea Stock Exchange from 2013 to 2022, we perform logistic regression and ordinary least squares regression. We first find that the higher the foreign investor’s share, the higher the likelihood of adopting a compensation committee. Second, we find that the higher the foreign investor’s share, the higher the ratio of outside directors on the compensation committee while the lower the likelihood that the CEO participates in the compensation committee. Third, we unveil that the higher the foreign investor’s share, the higher the likelihood that accounting and financial experts or female directors participate in the compensation committee. Finally, we uncover that the higher the foreign investor’s share, the higher the comprehensive measure of the compensation committee. These test results imply that foreign investors contribute to the adoption and effective composition of compensation committee.