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Firm performance, corporate governance and executive compensation in Pakistan

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Sheikh, M. F., Shah, Syed Zulfiqar Ali and Akbar, S. (2018) Firm performance, corporate governance and executive compensation in Pakistan. Applied Economics, 50 (18). 2012-2027 . doi:10.1080/00036846.2017.1386277 ISSN 0003-6846.

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Official URL: http://doi.org/10.1080/00036846.2017.1386277

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Abstract

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 over the period 2005–2012, we find that both current- and previous-year accounting performances 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.

Item Type: Journal Article
Divisions: Faculty of Social Sciences > Warwick Business School
Journal or Publication Title: Applied Economics
Publisher: Taylor & Francis Ltd.
ISSN: 0003-6846
Official Date: 15 April 2018
Dates:
DateEvent
15 April 2018Published
9 October 2017Available
27 September 2017Accepted
Volume: 50
Number: 18
Page Range: 2012-2027
DOI: 10.1080/00036846.2017.1386277
Status: Peer Reviewed
Publication Status: Published
Access rights to Published version: Restricted or Subscription Access
Date of first compliant deposit: 29 September 2017
Date of first compliant Open Access: 9 April 2019
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