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The Impact of Financial Performance Indicators on Executive Compensation

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  • Ä°brahim KAYA

Abstract

The relationship between executive compensation and firm performance has long been a subject of debate in both academic literature and business practice. This study aims to examine the relationship between executive compensation and both accounting-based and market-based financial indicators. The sample consists of 28 firms listed in the BIST 50 index over the period 2014–2023. The effects of accounting-based indicators (earnings per share, return on equity) and market-based indicators (market value, market-to-book ratio, stock price) on executive compensation are analyzed using panel data methods. The findings indicate that earnings per share and return on equity, as accounting-based indicators, and the market-to-book ratio, as a market-based indicator, have statistically significant effects on executive compensation. In addition, firm size and the COVID-19 variable, included as control variables, are also found to be significant. The results reveal that firm size is the most influential determinant of executive compensation. Specifically, a 1% increase in total assets leads to approximately a 0.78% increase in executive compensation. In contrast, the effects of other variables are relatively limited.

Suggested Citation

  • Ä°brahim KAYA, 2026. "The Impact of Financial Performance Indicators on Executive Compensation," Fiscaoeconomia, Tubitak Ulakbim JournalPark (Dergipark), issue 2.
    • Handle: RePEc:fis:journl:260231
    DOI: 10.25295/fsecon.1767819
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    Keywords

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    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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