An Alternative Method of Estimation of SUR Model

Rana, Shohel; Amin, Mohammad Mastak Al

doi:10.11648/j.ajtas.20150403.20

Cited by 2 publications

(1 citation statement)

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“…Consequently, the use of only ordinary least squares regression could result in biased findings and erratic results as ordinary least squares regression ignores time-invariant unobserved individual effects and endogeneity (Flannery & Hankins 2013;Maddala & Lahiri 2009). Generalised least squares regression estimates unknown parameters in a linear regression model that can be applied when the variances of the observations are unequal or when there is a certain level of correlation between variables (Rana & Al Amin 2015). The introduction of a lagged effect in the dependent variable significantly reduced the endogeneity of the dataset.…”

Section: Data and Analysis Methodsmentioning

confidence: 99%

The relationship between remuneration and financial performance for companies listed on the Johannesburg Stock Exchange

Kirsten

Toit

2018

SAJEMS

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Background: The executive directors of a company are the agents of the shareholders and should manage the company in the best interest of the shareholders, not only for personal gain. It is therefore important for companies to ensure that they implement remuneration policies which will result in motivated employees who will execute decisions and actions which are in the best interest of the shareholders. However, it is widely acknowledged that the relationship between company performance and executive remuneration is weak. This implies that executives are still rewarded excessive remuneration regardless of the performance of their companies. Aim: The purpose of this study was to determine whether a relationship exists between the performance-based remuneration of executive directors and the financial performance of South African companies. Setting: The study was conducted in South Africa, specifically on companies listed on the Johannesburg Stock Exchange. Methods: The study design was quantitative and made use of a Pearson correlation and generalised least squares regression with bootstrapping at a 95% confidence interval to analyse the relationship between executive director remuneration and the financial performance of 42 companies in the consumer goods and services industry of the Johannesburg Stock Exchange (JSE) from 2006 to 2015. Results: The study established that the remuneration policies in place for South African executive directors within the consumer goods and services industry seem to be affected by the share price of the company. Conclusion: In the South African environment, executive director remuneration is thus not directly related to profitability or company size, as was the case in some earlier studies. The link between executive director remuneration and share performance may be an indication that remuneration policies are based on the share price and are thus directly connected to the principle of shareholder wealth maximisation.

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Section: Data and Analysis Methodsmentioning

confidence: 99%