Firm performance, corporate governance and executive compensation in Pakistan
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2018Keyword
Corporate governanceDynamic panel
Emerging markets
Executive compensation
Executive compensation
Firm performance
Fixed effects
Pakistan
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© 2017 Taylor & Francis. This is an Author's Original Manuscript of an article published by Taylor & Francis in Applied Economics in 2017 available online at https://doi.org/10.1080/00036846.2017.1386277Peer-Reviewed
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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 (KSE) over the period 2005 to 2012, we find that both current and previous year accounting performance 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.Version
Accepted manuscriptCitation
Sheikh MF, Shah SZA and Akbar S (2018) Firm performance, corporate governance and executive compensation in Pakistan. Applied Economics. 50 (18):2012-2027.Link to Version of Record
https://doi.org/10.1080/00036846.2017.1386277Type
Articleae974a485f413a2113503eed53cd6c53
https://doi.org/10.1080/00036846.2017.1386277