TY - JOUR
T1 - Firm performance, corporate governance and executive compensation in Pakistan
AU - Sheikh, Muhammad Fayyaz
AU - Shah, Syed Zulfiqar Ali
AU - Akbar, Saeed
N1 - Publisher Copyright:
© 2017 Informa UK Limited, trading as Taylor & Francis Group.
Copyright:
Copyright 2018 Elsevier B.V., All rights reserved.
PY - 2018/4/15
Y1 - 2018/4/15
N2 - 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.
AB - 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.
KW - Corporate governance
KW - dynamic panel
KW - emerging markets
KW - executive compensation
KW - firm performance
KW - fixed effects
UR - http://www.scopus.com/inward/record.url?scp=85030853475&partnerID=8YFLogxK
U2 - 10.1080/00036846.2017.1386277
DO - 10.1080/00036846.2017.1386277
M3 - Article
AN - SCOPUS:85030853475
VL - 50
SP - 2012
EP - 2027
JO - Applied Economics
JF - Applied Economics
SN - 0003-6846
IS - 18
ER -
