Corporate Governance Mechanism and Firm Performance as Determinants of CEO Compensation: A Panel Data Analysis of Pakistani Listed Companies
DOI:
https://doi.org/10.1956/jge.v8i4.262Keywords:
Firm Performance, CEO Compensation, Corporate Governance, Board Size, Audit Expenditure.Abstract
The purpose of this study is to investigate the impact of corporate governance, firm performance on CEO compensation. More specific, firm performance, board size and audit expenditure are linked with CEO compensation. Using panel data for 151 Pakistani firms listed on Karachi Stock Exchange (KSE), fixed effects regression has been performed. The results indicate firm performance is negatively associated with CEO compensation, which hold managerial power theory. While, board size and audit expenditure showed a positive relationship with CEO compensation, which reflects the presence of human capital theory. The results of study are in line with the prior studies done on CEO compensation.
References
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Brown, C., and J.L. Medoff (2003) ‘Firm age and wages’, Journal of Labor Economics 21(3),677-697.
Core, J.E., R.W. Haulthhausen, and D.F. Larcker (1999) ‘Corporate governance, chief executive officer compensation and firm performance’, Journal of Financial Economics 51(3):371-406.
Duffhues, P., and R. Kabir (2007) ‘Is the pay – performance relationship always positive? Evidence from the Netherlands’, Journal of Multinational Financial Management 18(1): 45-60.
Green, W. H., (1993). Econometric Analysis, Second Edition. Macmillan Publishing Company, New York.
Jensen, M.C. and K.J. Murphy (1990) ‘Performance Pay and Top Management Incentives’, Journal of Political Economy 98(2): 225-64.
Jensen, M.C. (1989) ‘Eclipse of the public Corporation’, Harvard Business Review 67(5): 61-75.
Kato, T., K. Kubo (2003) ‘CEO compensation and firm performance in Japan: From new panel data on individual CEO pay’, Journal of Japanese and International Economics Evidence 20(1): 1-19.
Kerr, J. L., and R.A. Bettis (1987) ‘Board of directors, top management compensation and shareholder returns’, Academy of Management Journal 30(4): 645-664.
Kostiuk, P. (1990) ‘Firm Size and Executive Compensation’, Journal of Human Resources 25(1): 90-105.
Meharan, H. (1995) ‘Executive compensation structure, ownership and firm performance’, Journal of Financial Economics38: 163-184.
Oxelheim, L., and T. Randoy (2005) ‘The Anglo American Financial influence on CEO compensation in non-Anglo American firms,’ Journal of International Business Studies36: 470-483.
Shah, S.Z., Javed. T., Abbas, M. (2009) ‘Determinants of CEO compensation: Empirical evidence from Pakistani listed companies, International Research Journal of Finance and Economics 32: 148-159.
Tosi, H.L., S. Werner, J.P. Katz, and L. Gomez-Meija (2000) ‘How much does performance matter? A meta-analysis of CEO pay studies’, Journal of Management 26(2):301-339.
Yermarck, D. (1996) ‘Higher Market Valuation of Companies with a Small Board of Directors’, Journal of Financial Economics 40(2): 185-211.
Brown, C., and J.L. Medoff (2003) ‘Firm age and wages’, Journal of Labor Economics 21(3),677-697.
Core, J.E., R.W. Haulthhausen, and D.F. Larcker (1999) ‘Corporate governance, chief executive officer compensation and firm performance’, Journal of Financial Economics 51(3):371-406.
Duffhues, P., and R. Kabir (2007) ‘Is the pay – performance relationship always positive? Evidence from the Netherlands’, Journal of Multinational Financial Management 18(1): 45-60.
Green, W. H., (1993). Econometric Analysis, Second Edition. Macmillan Publishing Company, New York.
Jensen, M.C. and K.J. Murphy (1990) ‘Performance Pay and Top Management Incentives’, Journal of Political Economy 98(2): 225-64.
Jensen, M.C. (1989) ‘Eclipse of the public Corporation’, Harvard Business Review 67(5): 61-75.
Kato, T., K. Kubo (2003) ‘CEO compensation and firm performance in Japan: From new panel data on individual CEO pay’, Journal of Japanese and International Economics Evidence 20(1): 1-19.
Kerr, J. L., and R.A. Bettis (1987) ‘Board of directors, top management compensation and shareholder returns’, Academy of Management Journal 30(4): 645-664.
Kostiuk, P. (1990) ‘Firm Size and Executive Compensation’, Journal of Human Resources 25(1): 90-105.
Meharan, H. (1995) ‘Executive compensation structure, ownership and firm performance’, Journal of Financial Economics38: 163-184.
Oxelheim, L., and T. Randoy (2005) ‘The Anglo American Financial influence on CEO compensation in non-Anglo American firms,’ Journal of International Business Studies36: 470-483.
Shah, S.Z., Javed. T., Abbas, M. (2009) ‘Determinants of CEO compensation: Empirical evidence from Pakistani listed companies, International Research Journal of Finance and Economics 32: 148-159.
Tosi, H.L., S. Werner, J.P. Katz, and L. Gomez-Meija (2000) ‘How much does performance matter? A meta-analysis of CEO pay studies’, Journal of Management 26(2):301-339.
Yermarck, D. (1996) ‘Higher Market Valuation of Companies with a Small Board of Directors’, Journal of Financial Economics 40(2): 185-211.
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Published
04.01.2013
How to Cite
younas, zahid I., Mehmood, B., Ilyas, A. and Bajwa, H. A. (2013) “Corporate Governance Mechanism and Firm Performance as Determinants of CEO Compensation: A Panel Data Analysis of Pakistani Listed Companies”, Journal of Global Economy, 8(4), pp. 307–314. doi: 10.1956/jge.v8i4.262.
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