Determinants of CEO pay: empirical evidence from Nigerian quoted banks

Olaniyi, Clement Olalekan; Obembe, Olufemi Bodunde

doi:10.1504/ijbpm.2017.10004094

Cited by 6 publications

(15 citation statements)

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“…In contrast, García‐Meca (2016) suggests that female representation on the board reduces the compensation of executives, but political connection increases it. Olaniyi and Obembe (2017) contend that CEOs' tenure, bank size, and previous CEOs' pay are the main drivers of board composition. Also, Al‐Tamimi and Charif (2013) used survey data and found evidence that the role of directors is determined by their governance awareness, education background, experience, and compensation.…”

Section: Slr Findingsmentioning

confidence: 99%

Nudging toward diversity in the boardroom: A systematic literature review of board diversity of financial institutions

et al. 2020

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Going beyond the mere gender diversity in the boardroom, this systematic review comprehensively covers the research on board diversity of financial institutions. More specifically, we cover gender diversity, as well as other characteristics of diversity, such as nationality, age, tenure, experience, education, ethnicity, and religion. A systematic literature review was employed using Scopus and Web of Science databases, covering all publications until May 2020, which resulted in 91 studies from 66 top‐ranked journals in accounting, finance, and economic fields. We analyze them based on the journal, methodology, research construct questions, and theoretical perspectives. Our results highlight the substantial knowledge gaps and the inconsistent findings of prior studies on several aspects of the field, suggesting avenues for further studies in terms of research designs, settings, scope, and theories. We argue that there is a need to explore other board diversity attributes rather than focusing on the gender diversity of the boards of financial institutions to achieve sustainable development. Also, more work is outlined on topics related to board diversity of financial firms that receive limited attention from scholars, such as (but not limited to) environmental performance, capital structure, intellectual capital, innovation and earnings quality of financial institutions, as well as the indirect effect of policy settings.

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Section: Slr Findingsmentioning

confidence: 99%

Nudging toward diversity in the boardroom: A systematic literature review of board diversity of financial institutions

et al. 2020

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“…As a result of this assertion, empirical studies have emphasized the importance of chief executive officers’ (CEO) pay as an internal mechanism of corporate governance in quoted firms to align the shareholders’ interests with those of CEOs (Tosi et al , ; Choo and Tan, ; Kim and Gu, ; Core et al , ). While some empirical studies modeled CEO pay to be a function of firm performance (Olaniyi and Obembe, ; Faria et al , ; Faleye et al , ; Duffhues and Kabir, ; Brick et al , ); some others modeled it to be a determinant of firm performance (Amzaleg et al , ; Buck et al , ; Kim and Gu, ; Choo and Tan, ; Olaniyi and Obembe, ). Thus, studies have modeled the link between CEO pay and firm performance in either way (Upneja and Ozdemir, ).…”

Section: Introductionmentioning

confidence: 99%

Analysis of the Nexus between CEO Pay and Performance of Non-Financial Listed Firms in Nigeria

Olaniyi¹,

Obembe²,

Oni³

2017

African Development Review

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This study examines the causal relationship between CEO pay and firm performance in Nigeria for the period 1998-2010, using annual data of 63 non-financial listed firms. We adopt a two-step dynamic generalized method of moments to explore the causal relationship. The study establishes a bi-directional relationship between CEO pay and firm performance. While CEO pay Granger-causes firm performance, firm performance also Granger-causes CEO pay. It implies that CEO pay acts both as a reward and a performance motivator. This study therefore suggests that CEO pay effectively aligns shareholders' interests with those of CEOs; hence stakeholders should focus more on CEO pay as a corporate governance mechanism to reduce agency problem in non-financial listed firms in Nigeria. 429Moreover, following the two modelling strategies, empirical studies on the relationship between CEO pay and firm performance occupy a substantial portion of economic literature, most especially in advanced countries and emerging economies with limited attention from developing countries and sub-Saharan Africa in particular. Meanwhile, previous empirical investigations have continued to yield conflicting results. Some of these studies have obtained a weak or negative relationship or none at all (Jensen and Murphy, ). Results continue to differ depending on the environment, methodology and the measures of firm performance adopted in various studies.Apart from the inconclusiveness of previous studies, the bulk of these studies ignored the effect of executive pay on firm performance, despite the fact that motivation is the main rationale for executive pay packages. This was hinted at by Jensen and Murphy (1990) who stated that executive pay is 'designed to give manager incentives to select and implement actions that increase shareholders' wealth'. Moreover, Buck et al. (2008) and Tosi et al. (2000) contended that all studies surveyed, most especially in Europe, used pay as the dependent variable which means firm performance is considered a determinant of executive pay, neglecting the possibility of feedback effect from pay to performance. The prevalence of long-term incentives (equity incentives), such as stock awards and options, for managers in Europe has made it extremely difficult to separate reward from motivation (Buck et al., 2008;Jegede, 2012;Olaniyi and Obembe, 2015;Liang et al., 2016;Omoregie and Kelikume, 2017). Hence, the majority of empirical studies from advanced countries focused on the effect of firm performance on directors' compensation (performance-based pay) without exploring the possibility of feedback. Meanwhile, executive directors of publicly traded firms in developing countries, most especially sub-Saharan Africa, are usually paid in cash, not in the form of long-term incentives such as equity-based pay. This gives ample opportunity to examine CEO pay as a factor that determines firm performance (Buck et al., 2008). Globally, only few studies (Choo and Tan, 2004;Buck et al., 2008;Omoregie and Kelikume, 2017; Amdouni, 2016) h...

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“…Meanwhile, the theoretical perspective and research outcomes have remained contentious and inconclusive. Some scholars view CEO pay as a reward for performance by stressing performance‐based pay for CEOs (Adeusi, 2021; Bhuyan et al, 2022; Buck et al, 2008; Edem et al, 2021; Fama, 1980; Jatana, 2023; Kurawa & Kabiru, 2014; Obembe et al, 2016; Olaniyi & Obembe, 2017; Olaniyi, Obembe, & Oni, 2017; Olaniyi & Olayeni, 2020; Saidu & Alkhawlani, 2017; Soni & Singh, 2020; Umobong & Bele–Egberi, 2019). The principle underlies performance as a major determinant of CEO pay (Khursheed & Sheikh, 2022; Kweh et al, 2022).…”

Section: Introductionmentioning

confidence: 99%

“…This indicates that CEOs are rewarded for good performance and punished for unfavorable performance. This strand of literature believes that CEO pay is an increasing function of firm performance (Olaniyi & Obembe, 2017; Sajnóg & Rogozińska‐Pawełczyk, 2022). It is the performance that explains CEO pay.…”

Section: Introductionmentioning

confidence: 99%

Do the same executive compensation strategies and policies fit all the firms in the banking industry? New empirical insights from the CEO pay–firm performance causal nexus

Olaniyi

2023

Manage Decis Econ

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This study introduces the roles of firms' intertwining and policy variations across firms in the CEO pay–bank performance causal relationships in Nigeria, using the Dumitrescu–Hurlin panel Granger non‐causality test and second‐generation estimators. The findings reveal that banks' interdependence, diverse strategies, and policies vary across banks. In 11 banks, CEO pay is not a reward for bank performance or an incentive to perform. Meanwhile, two banks utilize performance‐based pay for their CEOs, while the remaining two adopt CEO pay as a performance motivator. The study concludes that firms' interdependence and policy variations across firms influence the CEO pay–bank performance nexus.

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Determinants of CEO pay: empirical evidence from Nigerian quoted banks

Cited by 6 publications

References 0 publications

Nudging toward diversity in the boardroom: A systematic literature review of board diversity of financial institutions

Nudging toward diversity in the boardroom: A systematic literature review of board diversity of financial institutions

Analysis of the Nexus between CEO Pay and Performance of Non-Financial Listed Firms in Nigeria

Do the same executive compensation strategies and policies fit all the firms in the banking industry? New empirical insights from the CEO pay–firm performance causal nexus

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