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

Clement Olalekan Olaniyi; Ademola Obafemi Young; Xuan Vinh Vo; Mamdouh Abdulaziz Saleh Al-Faryan

doi:10.1002/mde.3603

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

Clement Olalekan Olaniyi^*, Ademola Obafemi Young, Xuan Vinh Vo, Mamdouh Abdulaziz Saleh Al-Faryan

^*Corresponding author for this work

University of Portsmouth

Research output: Contribution to journal › Article › peer-review

Abstract

This study examines the role of institutional quality and its threshold in the sensitivity of CEO pay to firm performance in an emerging market economy, using a generalized method of moments, Driscoll and Kraay's nonparametric covariance matrix estimator, and robust dynamic panel threshold. Bureaucratic quality and corruption control weaken performance-based pay for CEOs, while law and order strengthen it. The overall institutions allow boardroom backscratching which biases executive compensation contracts. The study shows that the country operates below the institutional quality threshold values required to spur performance-based pay for CEOs. The study concludes that institutions matter in CEO pay-firm performance nexus.

Original language	English
Number of pages	18
Journal	Managerial and Decision Economics
Early online date	16 Mar 2022
DOIs	https://doi.org/10.1002/mde.3603
Publication status	Early online - 16 Mar 2022

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abstract = "This study examines the role of institutional quality and its threshold in the sensitivity of CEO pay to firm performance in an emerging market economy, using a generalized method of moments, Driscoll and Kraay's nonparametric covariance matrix estimator, and robust dynamic panel threshold. Bureaucratic quality and corruption control weaken performance-based pay for CEOs, while law and order strengthen it. The overall institutions allow boardroom backscratching which biases executive compensation contracts. The study shows that the country operates below the institutional quality threshold values required to spur performance-based pay for CEOs. The study concludes that institutions matter in CEO pay-firm performance nexus.",

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AU - Olaniyi, Clement Olalekan

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AU - Al-Faryan, Mamdouh Abdulaziz Saleh

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

Abstract

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