CEOs Compensation and Firm Performance: Evidence from Bhutan

Abstract

This paper aims to explore the relationship between the remuneration of CEOs and the success of DHI companies owned and regulated in Bhutan. Financial data, obtained from secondary sources, for the period of 5 years from 2014 to 2018 using three performance indicators – Earnings after Tax, Return on Equity, and Tobin’s q ratio were analyzed. CEOs’ remuneration comprising salary and all other allowances, disclosed in the annual report were taken. Correlation and bivariate regression analysis were used to find the relationship between the compensation of CEOs and the success of firm performance. EAT and ROE show positive and Tobin’s q ratio shows negative relationship between CEOs’ remuneration. Further, CEOs’ remuneration is observed to cause variability in EAT and ROE.