IDEAS home Printed from https://ideas.repec.org/a/ers/ijebaa/viy2013i1p137-155.html
   My bibliography  Save this article

CEO Compensation System in Large Canadian Financial Institutions

Author

Listed:
  • Yusuf Mohammed Nulla
  • Dimitris Nikolaou Koumparoulis

Abstract

This study investigated the CEO Compensation system of the Canadian Financial Institutions. It attested the relationship between the CEO Compensation, the Firm Size, the Firm Performance, and the CEO Power, in the TSX/S&P index companies from the period 2005 to the period 2010. The totalled of the eighteen largest Canadian financial companies were selected through the random sampling method from the TSX/S&P index. The research question for this study was: is there a relationship between the CEO Cash Compensation, the Firm Size, the Firm Performance, and the CEO Power? To answer this question, six statistical models were created and accordingly six attestations were performed. It was found that, there was a relationship between the CEO Salary, the Firm Size, the Firm Performance, and the CEO Power; there was a relationship between the CEO Bonus and the CEO Power; and there was a relationship between the CEO Total Compensation and the Firm Size and Firm Performance. However, it was found that there was no relationship between the CEO Bonus, the Firm Size, and the Firm Performance. In addition, it was found that there was no relationship between the CEO Total Compensation and the CEO Power. The correlation between the CEO Cash Salary, the Firm Size, and the Firm Performance was positively good to strong ratios; the correlation between the CEO Salary and the CEO Power was negatively weak ratio; and the correlation between the CEO Bonus, the Firm Size, the Firm Performance, and the CEO Power was positively weak.

Suggested Citation

  • Yusuf Mohammed Nulla & Dimitris Nikolaou Koumparoulis, 2013. "CEO Compensation System in Large Canadian Financial Institutions," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(1), pages 137-155.
    • Handle: RePEc:ers:ijebaa:v:i:y:2013:i:1:p:137-155
    as

    Download full text from publisher

    File URL: http://www.ersj.eu/repec/ers/pijeba/13_1_p7.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Karel HavlÃ­Ä ek & Eleftherios Thalassinos & Liliana Berezkinova, 2013. "Innovation Management and Controlling in SMEs," European Research Studies Journal, European Research Studies Journal, vol. 0(4), pages 57-70.
    2. Blanchard, Olivier Jean & Lopez-de-Silanes, Florencio & Shleifer, Andrei, 1994. "What do firms do with cash windfalls?," Journal of Financial Economics, Elsevier, vol. 36(3), pages 337-360, December.
    3. Murphy, Kevin J., 1985. "Corporate performance and managerial remuneration : An empirical analysis," Journal of Accounting and Economics, Elsevier, vol. 7(1-3), pages 11-42, April.
    4. Richard M. Cyert & Sok-Hyon Kang & Praveen Kumar, 2002. "Corporate Governance, Takeovers, and Top-Management Compensation: Theory and Evidence," Management Science, INFORMS, vol. 48(4), pages 453-469, April.
    5. Sydney Finkelstein & Donald C. Hambrick, 1989. "Chief executive compensation: A study of the intersection of markets and political processes," Strategic Management Journal, Wiley Blackwell, vol. 10(2), pages 121-134, March.
    6. Coughlan, Anne T. & Schmidt, Ronald M., 1985. "Executive compensation, management turnover, and firm performance : An empirical investigation," Journal of Accounting and Economics, Elsevier, vol. 7(1-3), pages 43-66, April.
    7. repec:ers:journl:v:xvi:y:2013:i:sisme:p:57-70 is not listed on IDEAS
    8. Agrawal, Anup & Knoeber, Charles R., 1996. "Firm Performance and Mechanisms to Control Agency Problems between Managers and Shareholders," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 31(3), pages 377-397, September.
    9. Sloan, Richard G., 1993. "Accounting earnings and top executive compensation," Journal of Accounting and Economics, Elsevier, vol. 16(1-3), pages 55-100, April.
    10. Demsetz, Harold & Villalonga, Belen, 2001. "Ownership structure and corporate performance," Journal of Corporate Finance, Elsevier, vol. 7(3), pages 209-233, September.
    11. Mehran, Hamid, 1992. "Executive Incentive Plans, Corporate Control, and Capital Structure," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 27(4), pages 539-560, December.
    12. Marianne Bertrand & Sendhil Mullainathan, 2001. "Are CEOs Rewarded for Luck? The Ones Without Principals Are," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 116(3), pages 901-932.
    13. Anup Agrawal & Charles R. Knoeber, "undated". "Firm Performance and Mechanisms to Control Agency Problems between Managers and Shareholders (Revision of 29-94)," Rodney L. White Center for Financial Research Working Papers 8-96, Wharton School Rodney L. White Center for Financial Research.
    14. Himmelberg, Charles P. & Hubbard, R. Glenn & Palia, Darius, 1999. "Understanding the determinants of managerial ownership and the link between ownership and performance," Journal of Financial Economics, Elsevier, vol. 53(3), pages 353-384, September.
    15. Kevin J. Murphy, 1986. "Incentives, Learning, and Compensation: A Theoretical and Empirical Investigation of Managerial Labor Contracts," RAND Journal of Economics, The RAND Corporation, vol. 17(1), pages 59-76, Spring.
    16. Paul L. Joskow & Nancy L. Rose, 1994. "CEO Pay and Firm Performance: Dynamics, Asymmetries, and Alternative Performance Measures," NBER Working Papers 4976, National Bureau of Economic Research, Inc.
    17. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
    18. Donald C. Hambrick & Sydney Finkelstein, 1995. "The effects of ownership structure on conditions at the top: The case of CEO pay raises," Strategic Management Journal, Wiley Blackwell, vol. 16(3), pages 175-193.
    19. Mehran, Hamid, 1995. "Executive compensation structure, ownership, and firm performance," Journal of Financial Economics, Elsevier, vol. 38(2), pages 163-184, June.
    20. Peter F. Kostiuk, 1990. "Firm Size and Executive Compensation," Journal of Human Resources, University of Wisconsin Press, vol. 25(1), pages 90-105.
    21. Michael C. Jensen & Kevin J. Murphy, 2010. "CEO Incentives—It's Not How Much You Pay, But How," Journal of Applied Corporate Finance, Morgan Stanley, vol. 22(1), pages 64-76, January.
    22. Jensen, Michael C. & Zimmerman, Jerold L., 1985. "Management compensation and the managerial labor market," Journal of Accounting and Economics, Elsevier, vol. 7(1-3), pages 3-9, April.
    23. Arnould, Richard J., 1985. "Agency costs in banking firms: An analysis of expense preference behavior," Journal of Economics and Business, Elsevier, vol. 37(2), pages 103-112, May.
    24. Jensen, Michael C & Murphy, Kevin J, 1990. "Performance Pay and Top-Management Incentives," Journal of Political Economy, University of Chicago Press, vol. 98(2), pages 225-264, April.
    25. Anup Agrawal & Charles R. Knoeber, "undated". "Firm Performance and Mechanisms to Control Agency Problems between Managers and Shareholders (Revision of 29-94)," Rodney L. White Center for Financial Research Working Papers 08-96, Wharton School Rodney L. White Center for Financial Research.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. repec:ers:journl:v:special_issue:y:2018:i:1:p:407-422 is not listed on IDEAS
    2. L.Yu. Andreeva & V.V. Aksenov & A.V. Andreeva & M.L. Somko, 2018. "The Role of Retraining Technologies of Personnel in Ensuring Financial Stability of Transport and Industrial Companies," European Research Studies Journal, European Research Studies Journal, vol. 0(Special1), pages 407-422.
    3. repec:ers:journl:v:v:y:2017:i:4:p:35-55 is not listed on IDEAS
    4. Cismas Laura Mariana & Miculescu Andra & Otil Maria, 2017. "Human Capital and Its Influence on Sustained Economic Growth in Romania," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(4), pages 35-55.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Carola Frydman & Dirk Jenter, 2010. "CEO Compensation," Annual Review of Financial Economics, Annual Reviews, vol. 2(1), pages 75-102, December.
    2. Renneboog, L.D.R. & Trojanowski, G., 2002. "The Managerial Labor Market and the Governance Role of Shareholder Control Structures in the UK," Discussion Paper 2002-68, Tilburg University, Center for Economic Research.
    3. Chongwoo Choe & Gloria Tian & Xiangkang Yin, 2008. "Managerial Power, Stock-Based Compensation, And Firm Performance: Theory And Evidence," Monash Economics Working Papers 21/08, Monash University, Department of Economics.
    4. repec:eee:labchp:v:3:y:1999:i:pb:p:2485-2563 is not listed on IDEAS
    5. James, Hui & Benson, Bradley W. & Wu, Chen (Ken), 2017. "Does CEO ownership affect payout policy? Evidence from using CEO scaled wealth-performance sensitivity," The Quarterly Review of Economics and Finance, Elsevier, vol. 65(C), pages 328-345.
    6. Benson, Bradley W. & Chen, Yu & James, Hui L. & Park, Jung Chul, 2020. "So far away from me: Firm location and the managerial ownership effect on firm value," Journal of Corporate Finance, Elsevier, vol. 64(C).
    7. Kutlu, Levent & Nair-Reichert, Usha, 2022. "Executive compensation and the potential for additional efficiency gains: Evidence from the Indian manufacturing sector," Economic Modelling, Elsevier, vol. 114(C).
    8. Benson, Bradley W. & Davidson III, Wallace N., 2009. "Reexamining the managerial ownership effect on firm value," Journal of Corporate Finance, Elsevier, vol. 15(5), pages 573-586, December.
    9. Bradley W. Benson & Wallace N. Davidson III & Hongxia Wang & Dan L. Worrell, 2011. "Deviations from Expected Stakeholder Management, Firm Value, and Corporate Governance," Financial Management, Financial Management Association International, vol. 40(1), pages 39-81, March.
    10. Jean-Christophe Duhamel & Réda Sefsaf, 2017. "Valeur de la gouvernance d'entreprise et gouvernance des valeurs de l'entreprise. Recherche sur les effets des codes de gouvernance et les stratégies de communication en matière de gouvernance," Working Papers halshs-01633982, HAL.
    11. Jiraporn, Pornsit & Kim, Jang-Chul & Kim, Young Sang & Kitsabunnarat, Pattanaporn, 2012. "Capital structure and corporate governance quality: Evidence from the Institutional Shareholder Services (ISS)," International Review of Economics & Finance, Elsevier, vol. 22(1), pages 208-221.
    12. Ming-Yuan Leon Li & Shang-En Shine Yu, 2011. "Do large firms overly use stock-based incentive compensation?," Journal of Applied Statistics, Taylor & Francis Journals, vol. 38(8), pages 1591-1606, July.
    13. Christian Weiss & Stefan Hilger, 2012. "Ownership concentration beyond good and evil: is there an effect on corporate performance?," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 16(4), pages 727-752, November.
    14. Yuan George Shan, 2019. "Managerial ownership, board independence and firm performance," Accounting Research Journal, Emerald Group Publishing Limited, vol. 32(2), pages 203-220, July.
    15. Wolfgang Drobetz & Pascal Pensa & Markus M. Schmid, 2007. "Estimating the Cost of Executive Stock Options: evidence from Switzerland," Corporate Governance: An International Review, Wiley Blackwell, vol. 15(5), pages 798-815, September.
    16. Chaur‐Shiuh Young & Liu‐Ching Tsai & Pei‐Gin Hsieh, 2008. "Voluntary Appointment of Independent Directors in Taiwan: Motives and Consequences," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 35(9‐10), pages 1103-1137, November.
    17. Hubbard, R. Glenn & Palia, Darius, 1995. "Executive pay and performance Evidence from the U.S. banking industry," Journal of Financial Economics, Elsevier, vol. 39(1), pages 105-130, September.
    18. Francesco Perrini & Ginevra Rossi & Barbara Rovetta, 2008. "Does Ownership Structure Affect Performance? Evidence from the Italian Market," Corporate Governance: An International Review, Wiley Blackwell, vol. 16(4), pages 312-325, July.
    19. Ming‐Yuan Chen, 2010. "The Components Of Managerial Pay Adjustments And Their Impact On Firm Performance," Manchester School, University of Manchester, vol. 78(6), pages 582-608, December.
    20. Rachel Merhebi & Kerry Pattenden & Peter L. Swan & Xianming Zhou, 2006. "Australian chief executive officer remuneration: pay and performance," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 46(3), pages 481-497, September.
    21. Alex Edmans & Xavier Gabaix, 2016. "Executive Compensation: A Modern Primer," Journal of Economic Literature, American Economic Association, vol. 54(4), pages 1232-1287, December.

    More about this item

    Keywords

    CEO Compensation; Firm Performance; Firm Size; CCEO Power; Canadian Financial Institutions; Accounting Performance;
    All these keywords.

    JEL classification:

    • G0 - Financial Economics - - General
    • G19 - Financial Economics - - General Financial Markets - - - Other
    • G29 - Financial Economics - - Financial Institutions and Services - - - Other

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ers:ijebaa:v:i:y:2013:i:1:p:137-155. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Marios Agiomavritis (email available below). General contact details of provider: https://ijeba.com/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.