Mergers, executive compensation and firm performance: The case of Africa

Abstract

This study examines the impact of executive compensation on firm performance after successful mergers and acquisitions (M&A) in Africa between 2005 and 2016. Using accounting and financial performance measures and controlling for firm, deal and corporate governance factors, we show that executive compensation induced by M&A in Africa negatively affect the performance of listed firms. There is also evidence to support the impact of firm size, deal size, target destination, foreign ownership, diversification, outside board representation and executive ownership on the pay‐performance nexus. Besides, corporate governance factors in Africa, generally, worsen firm performance, especially for cash and total pay.

Do institutional framework and its threshold matter in the sensitivity of CEO pay to firm performance? Fresh insights from an emerging market economy

“…The results of regressions that account for cross‐sectional dependence reveal that there is evidence of performance‐based pay for CEOs of Nigeria's quoted firms. The findings support the theoretical proposition of agency theory that performance should be used as a positive driver of CEO pay to align the managers' and shareholders' interests (Al‐Shammari, 2021; Amewu & Alagidede, 2021; Dang et al, 2021; Hu & Xu, 2021; Jensen & Meckling, 1976; Ko et al, 2020; Yang et al, 2020; Zoghlami, 2021). This finding equally confirms the research outputs of extant studies such as Chen et al (2021), Bouteska and Mefteh‐Wali (2021), Singh et al (2021), Al‐Faryan (2021), Ibrahim et al (2021), and Bhuyan et al (2020) which affirm the theoretical propositions of the classical agency theory.…”

“…CEO pay has continued to generate a great deal of research, debate, and discussion as a corporate governance tool in finance literature (Agyemang‐Mintah & Schadewitz, 2019; Al‐Najjar, 2017; Amewu & Alagidede, 2021; Amewu & Alagidede, 2021; Ataay, 2018; Chaigneau & Sahuguet, 2018; Lin & Shi, 2020; Mans‐Kemp & Viviers, 2018; Nourayi, 2006; Olaniyi, 2019; Olaniyi & Olayeni, 2020; Rahman & Mustafa, 2018; Saravanan et al, 2016; Wang & Deng, 2021; Wu, 2021). Agency‐theoretical proposition suggests that CEO pay should be closely tied to firm performance as an effective mechanism of corporate governance to match the managers and shareholders' interests (Al‐Shammari, 2021; Choi et al, 2019; Dang et al, 2021; Ghrab et al, 2021; Gloor, 2021; Jensen & Murphy, 1990; Waleed et al, 2021).…”

Executive compensation and the financial performance of Polish listed companies from the corporate governance perspective

“…The level of compensation offered to chief executive officers (CEOs) and the relationship between executive pay and companies' financial performance are among the issues that the corporate governance literature deals with the most often. This topic was discussed in the last several decades (Jensen & Murphy, 1990;Mäkinen, 2005;Kato & Kubo, 2006;Brick et al, 2006;Iwu-Egwuonwu, 2010;Ozkan, 2011;Raithatha & Komera, 2016;Amarou & Bensaid, 2017;Yamina & Mohamed, 2017) as well as in recent years (Le et al, 2020;Lin & Shi, 2020;Dias et al, 2020;Amewu & Alagidede, 2021;Cui et al, 2021;Ding & Chea, 2021;Wang et al, 2021;Chen & Hassan, 2022;Kayani & Gan, 2022). Nonetheless, some authors have demonstrated empirically that the relationship between executive compensation and financial performance is significant and positive, while others have not found such a relationship at all.…”

Could Executive Compensation Incentive Enhance the Efficiency of Enterprise Resource Allocation? An Empirical Study from China

“…Further studies have found that management rights play an inhibitory role in the relationship between them [22], and factors such as capital structure [25] and competitive strategy [26] play an intermediary and mediation role in the process of executive compensation incentive affecting corporate performance. However, some foreign scholars find that executive incentive compensation is not conducive to corporate performance improvement with corporate data [27]. Too low or too high remuneration of independent directors will have a negative impact on the efficiency of corporate governance [28].…”