Directors' Remuneration and Performance in Australian Banking
This paper explores the relationship between directors’ and Chief Executive Officers’ pay and performance within Australian banking, using panel data for the 1992-2005 period. Several earnings models are estimated, using different dependent variables, alternate measures of performance and different estimation techniques. The results indicate an absence of a contemporaneous relationship between directors’ pay and firm performance, and no association with prior year performance. However, there is a more distant pay-performance relationship, with total directors’ pay having a robust positive association with earnings per share lagged two years, as well as with ROE lagged two years. The other key determinants of directors’ pay in Australian banking are bank specific managerial policies, lags in the administration of pay, bank size, directors’ age and directors’ stock ownership. In contrast to total directors’ pay, the evidence confirms a strong positive and direct association between CEO remuneration and prior year bank performance. The pay-performance association is stronger and more direct for CEO remuneration than it is for total directors’ remuneration. The responsiveness of CEO pay with respect to bank performance appears to have increased over time.
|Date of creation:||29 Oct 2006|
|Date of revision:|
|Contact details of provider:|| Postal: 221 Burwood Highway, Burwood 3125|
Phone: 61 3 9244 3815
Web page: http://www.deakin.edu.au/buslaw/aef/index.php
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Boschen, John F & Smith, Kimberly J, 1995. "You Can Pay Me Now and You Can Pay Me Later: The Dynamic Response of Executive Compensation to Firm Performance," The Journal of Business, University of Chicago Press, vol. 68(4), pages 577-608, October.
- Lucian Arye Bebchuk & Jesse M. Fried, 2003.
"Executive Compensation as an Agency Problem,"
NBER Working Papers
9813, National Bureau of Economic Research, Inc.
- 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 225-64, April.
- Gibbons, R. & Murphy, K.J., 1990.
"Optimal Incentive Contracts In The Presence Of Career Concerns: Theory And Evidence,"
563, Massachusetts Institute of Technology (MIT), Department of Economics.
- Gibbons, Robert & Murphy, Kevin J, 1992. "Optimal Incentive Contracts in the Presence of Career Concerns: Theory and Evidence," Journal of Political Economy, University of Chicago Press, vol. 100(3), pages 468-505, June.
- Robert Gibbons & Kevin J. Murphy, 1991. "Optimal Incentive Contracts in the Presence of Career Concerns: Theory and Evidence," NBER Working Papers 3792, National Bureau of Economic Research, Inc.
- Murphy, K.J. & Gibbons, R., 1990. "Optimal Incentive Contracts in the Presence of Career Concerns : Theory and Evidence," Papers 90-09, Rochester, Business - Managerial Economics Research Center.
- Conyon, Martin J., 1997. "Corporate governance and executive compensation," International Journal of Industrial Organization, Elsevier, vol. 15(4), pages 493-509, July.
- Conyon, Martin & Gregg, Paul & Machin, Stephen, 1995. "Taking Care of Business, Executive Compensation in the United Kingdom," Economic Journal, Royal Economic Society, vol. 105(430), pages 704-14, May.
- Robert Gibbons & Kevin J. Murphy, 1989.
"Relative Performance Evaluation for Chief Executive Officers,"
NBER Working Papers
2944, National Bureau of Economic Research, Inc.
- Robert Gibbons & Kevin J. Murphy, 1990. "Relative performance evaluation for chief executive officers," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 43(3), pages 30-51, February.
- Gibbons, R. & Murphy, K.J., 1989. "Relative Performance Evaluation For Chief Executive Officers," Working papers 532, Massachusetts Institute of Technology (MIT), Department of Economics.
- Robert Gibbons & Kevin Murphy, 1989. "Relative Performance Evaluation for Chief Executive Officers," Working Papers 628, Princeton University, Department of Economics, Industrial Relations Section..
- Morris Knapp & Alan Gart & David Becher, 2005. "Post-Merger Performance of Bank Holding Companies, 1987-1998," The Financial Review, Eastern Finance Association, vol. 40(4), pages 549-574, November.
- J.A. Bikker & K. Haaf, 2000.
"Competition, concentration and their relationship: an empirical analysis of the banking industry,"
Research Series Supervision (discontinued)
30, Netherlands Central Bank, Directorate Supervision.
- Bikker, Jacob A. & Haaf, Katharina, 2002. "Competition, concentration and their relationship: An empirical analysis of the banking industry," Journal of Banking & Finance, Elsevier, vol. 26(11), pages 2191-2214, November.
- J.A. Bikker & K. Haaf, 2001. "Competition, Concentration and their Relationship: an EmpiricalAnalysis of the Banking Industry," DNB Staff Reports (discontinued) 68, Netherlands Central Bank.
- Kato, Takao & Kubo, Katsuyuki, 2006. "CEO compensation and firm performance in Japan: Evidence from new panel data on individual CEO pay," Journal of the Japanese and International Economies, Elsevier, vol. 20(1), pages 1-19, March.
- Berger, Allen N. & Hancock, Diana & Humphrey, David B., 1993. "Bank efficiency derived from the profit function," Journal of Banking & Finance, Elsevier, vol. 17(2-3), pages 317-347, April.
- Core, John E. & Holthausen, Robert W. & Larcker, David F., 1999. "Corporate governance, chief executive officer compensation, and firm performance," Journal of Financial Economics, Elsevier, vol. 51(3), pages 371-406, March.
- Brunello, Giorgio & Graziano, Clara & Parigi, Bruno, 2001. "Executive compensation and firm performance in Italy," International Journal of Industrial Organization, Elsevier, vol. 19(1-2), pages 133-161, January.
- Bebchuk, Lucian A. & Fried, Jesse M., 2003. "Executive Compensation as an Agency Problem," Berkeley Olin Program in Law & Economics, Working Paper Series qt81q3136r, Berkeley Olin Program in Law & Economics.
- Conyon, Martin J & Murphy, Kevin J, 2000. "The Prince and the Pauper? CEO Pay in the United States and United Kingdom," Economic Journal, Royal Economic Society, vol. 110(467), pages F640-71, November.
- Cosh, Andy & Hughes, Alan, 1997. "Executive remuneration, executive dismissal and institutional shareholdings," International Journal of Industrial Organization, Elsevier, vol. 15(4), pages 469-492, July.
- Stephen J. Perkins & Chris Hendry, 2005. "Ordering Top Pay: Interpreting the Signals," Journal of Management Studies, Wiley Blackwell, vol. 42(7), pages 1443-1468, November.
- Conyon, Martin J, 1998. "Directors' Pay and Turnover: An Application to a Sample of Large UK Firms," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 60(4), pages 485-507, November.
- T. D. Stanley, 2001. "Wheat from Chaff: Meta-analysis as Quantitative Literature Review," Journal of Economic Perspectives, American Economic Association, vol. 15(3), pages 131-150, Summer.
- David Yermack, 2004. "Remuneration, Retention, and Reputation Incentives for Outside Directors," Journal of Finance, American Finance Association, vol. 59(5), pages 2281-2308, October.
- Chung-Hua Shen & Yuen-Hsiang Chang, 2006. "Do Regulations Affect Banking Performance? Government Governance May Matter," Contemporary Economic Policy, Western Economic Association International, vol. 24(1), pages 92-105, 01.
- Chinmoy Ghosh & C. Sirmans, 2005. "On REIT CEO Compensation: Does Board Structure Matter?," The Journal of Real Estate Finance and Economics, Springer, vol. 30(4), pages 397-428, June.
When requesting a correction, please mention this item's handle: RePEc:dkn:econwp:eco_2006_11. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dr Xueli Tang)
If references are entirely missing, you can add them using this form.