Firm performance, corporate governance and executive compensation in Pakistan

Muhammad Fayyaz Sheikh, Syed Zulfiqar Ali Shah, Saeed Akbar

Research output: Contribution to journalArticlepeer-review

75 Citations (Scopus)


This study examines the effects of firm performance and corporate governance on chief executive officer (CEO) compensation in an emerging market, Pakistan. Using a more robust Generalized Method of Moments (GMM) estimation approach for a sample of non-financial firms listed at Karachi Stock Exchange over the period 2005–2012, we find that both current- and previous-year accounting performances has positive influence on CEO compensation. However, stock market performance does not appear to have a positive impact on executive compensation. We further find that ownership concentration is positively related with CEO compensation, indicating some kind of collusion between management and largest shareholder to get personal benefits. Inconsistent with agency theory, CEO duality appears to have a negative influence, while board size and board independence have no convincing relationship with CEO compensation, indicating board ineffectiveness in reducing CEO entrenchment. The results of dynamic GMM model suggest that CEO pay is highly persistent and takes time to adjust to long-run equilibrium.

Original languageEnglish
Pages (from-to)2012-2027
Number of pages16
JournalApplied Economics
Issue number18
Early online date9 Oct 2017
Publication statusPublished - 15 Apr 2018
Externally publishedYes


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