Chief Executive Officer Compensation and Financial Performance: Evidence from the Alternative Investment Market in the UK

Q3 Business, Management and Accounting

Indian Journal of Corporate Governance Pub Date : 2020-06-01 DOI:10.1177/0974686220923805

Danquah Jeff Boakye, Gabriel Sam Ahinful, Randolph Nsor-Ambala

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引用次数: 1

Abstract

Abstract Purpose: This article investigates the relationship between executive compensation and financial performance for Alternative Investment Market (AIM)-listed firms in the UK. While most studies have looked at the impact of executive compensation on financial performance, this study argues that the issue of reverse causality cannot be ignored even if it is controlled and therefore investigates the extent to which financial performance can also impact on executive remuneration. Design/methodology/approach: The study relies on a sample of 201 AIM-listed firms in the UK from 2011 to 2016 to examine the relationship between executive compensation and financial performance. It draws on agency and tournament theories to model the relationships between executive compensation and financial performance using various panel regression models. Findings: The findings from the study revealed that the chief executive officer (CEO) remuneration impact on both accounting- and market-based measures of financial performance. It also showed that while performance-based incentives like bonus and other long-term incentives linked to performance significantly impact on financial performance, salary, a cash-based non-performance-related compensation rather negatively affects performance. It was also discovered that financial performance can also influence the level of executive compensation and not always vice versa. Value/originality: The study adds novelties to the existing literature by introducing tournament theory to the studies on the relationship between executive compensation and financial performance. Most of the existing studies have been one sided and emphasise only on the influence of executive remuneration on financial performance. However, based on the tournament theory, the study argued that the issue of reverse causality between the two should not be overemphasised even if it is controlled.

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首席执行官薪酬与财务业绩:来自英国另类投资市场的证据

摘要目的:研究英国另类投资市场(AIM)上市公司高管薪酬与财务绩效之间的关系。虽然大多数研究都关注高管薪酬对财务绩效的影响，但本研究认为，即使反向因果关系得到控制，也不能忽视，因此调查了财务绩效对高管薪酬的影响程度。设计/方法/方法:本研究以2011年至2016年英国201家aim上市公司为样本，考察高管薪酬与财务绩效之间的关系。本文利用代理理论和竞赛理论，利用各种面板回归模型对高管薪酬与财务绩效之间的关系进行建模。研究结果:研究结果表明，首席执行官(CEO)薪酬对会计和基于市场的财务绩效指标都有影响。研究还表明，虽然基于绩效的激励措施，如奖金和其他与绩效挂钩的长期激励措施，对财务业绩有显著影响，但与绩效无关的现金薪酬对业绩的影响却相当负面。研究还发现，财务业绩也会影响高管薪酬水平，反之并非总是如此。价值/原创性:本研究将竞赛理论引入到高管薪酬与财务绩效关系的研究中，为现有文献增添了新意。现有的大多数研究都是片面的，只强调高管薪酬对财务业绩的影响。然而，基于比赛理论，该研究认为，即使两者之间的反向因果关系是可控的，也不应过分强调。

本文章由计算机程序翻译，如有差异，请以英文原文为准。

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来源期刊

Indian Journal of Corporate Governance Business, Management and Accounting-Business and International Management

CiteScore

2.00

自引率

0.00%

发文量

期刊介绍： Indian Journal of Corporate Governance is a bi-annual refereed journal that provides a forum for discussions and exchanging views on a wide range of corporate governance issues ranging from board practices, independent directors, whistle blower policies and shareholder activism on one hand to media’s role in corporate governance, corporate social responsibility and sustainability reporting on the other. It comprises of research articles, concept papers, case studies and reports providing a blend of theory and practices of corporate governance globally to cater to the interests of practitioners, academics, researchers and policy makers.