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CEO Compensation and Bank Performance

Author

Listed:
  • Athar, Iqbal
  • Khan, Muhammad Irfan
  • Ali, Saffar

Abstract

This study sets out to discover the determinants of compensation of the chief executive officers in the banking industry of Pakistan. Accounting based performance measures and size of the firm have been used as predictors. Results of the study are consistent with arguments, suggesting significant and positive impact of size (assets) of the firm on CEO compensation while no association is found with either of the performance measure of the firm except income before tax (IBT). Return on Assets and Return on Equity failed to explain the given phenomenon. The study further elaborates that number of employees (NOEMP) greatly influences on CEO compensation but negatively. This relationship may be due to the unique characteristics of Pakistan's social and economic structure.

Suggested Citation

  • Athar, Iqbal & Khan, Muhammad Irfan & Ali, Saffar, 2012. "CEO Compensation and Bank Performance," MPRA Paper 42402, University Library of Munich, Germany, revised 02 Sep 2012.
  • Handle: RePEc:pra:mprapa:42402
    as

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    File URL: https://mpra.ub.uni-muenchen.de/42402/1/MPRA_paper_42402.pdf
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    References listed on IDEAS

    as
    1. Lewellen, Wilbur G & Huntsman, Blaine, 1970. "Managerial Pay and Corporate Performance," American Economic Review, American Economic Association, vol. 60(4), pages 710-720, September.
    2. Anup Agrawal & Anil K. Makhija & Gershon Mandelker, 1991. "Executive Compensation and Corporate Performance in Electric and Gas Utilities," Financial Management, Financial Management Association, vol. 20(4), Winter.
    3. Mahmoud M. Nourayi & Frank P. Daroca, 2008. "CEO compensation, firm performance and operational characteristics," Managerial Finance, Emerald Group Publishing, vol. 34(8), pages 562-584, July.
    4. 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.
    5. 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 704-714, May.
    6. Nalinaksha Bhattacharyya & Amin Mawani & Cameron K.J. Morrill, 2008. "Dividend payout and executive compensation: theory and Canadian evidence," Managerial Finance, Emerald Group Publishing, vol. 34(8), pages 585-601, July.
    7. Cosh, Andrew, 1975. "The Remuneration of Chief Executives in the United Kingdom," Economic Journal, Royal Economic Society, vol. 85(337), pages 75-94, March.
    8. Giorgio Canarella & Arman Gasparyan, 2008. "New insights into executive compensation and firm performance: Evidence from a panel of “new economy” firms, 1996-2002," Managerial Finance, Emerald Group Publishing, vol. 34(8), pages 537-554, July.
    9. Murphy, Kevin J., 1999. "Executive compensation," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.),Handbook of Labor Economics, edition 1, volume 3, chapter 38, pages 2485-2563, Elsevier.
    10. Fama, Eugene F, 1980. "Agency Problems and the Theory of the Firm," Journal of Political Economy, University of Chicago Press, vol. 88(2), pages 288-307, April.
    11. Carlos Pestana Barros & Francisco Nunes, 2007. "Governance and CEO pay and performance in non-profit organizations," International Journal of Social Economics, Emerald Group Publishing, vol. 34(11), pages 811-827, October.
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    More about this item

    Keywords

    Compensation; Corporate Governance; Corporate Control; Return on Assets; Return on Investment;

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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