Board size, corporate regulations and firm valuation in an emerging market: a simultaneous equation approach

Corporate Governance Disclosure Index–Executive Pay Nexus: The Moderating Effect of Governance Mechanisms

“…Corporate boards are argued to play crucial roles in terms of monitoring, controlling and setting pay for managers that ensures that they act in the best interest of shareholders (Jensen, ; Ozkan, ). However, the ability of a corporate board to conduct its duties effectively can be influenced by the way it is structured (e.g., diversity and size) (Ntim et al ., , ; Ntim et al ., ). Thus, and in our study, we examine the effect of these two board structures (board size and diversity) on executive pay.…”

“…Theoretically, and in terms of board size, it is argued that poor governance is often associated with larger boards, since larger boards tend to be associated with more communication and coordination problems that can impair their effectiveness (Yermack, ; Bebchuk et al ., ). The weak monitoring can lead to managers rewarding themselves with overly generous pay packages (Ozkan, ; Ntim et al ., , ). In contrast, it is argued that larger boards are more effective in monitoring and controlling the opportunistic behaviours of management.…”

“…However, and despite controlling for a large set of corporate governance variables, these studies report similar positive and weak PPS. An observable limitation of these studies is that they do not sufficiently consider possible endogeneity concerns that may result from simultaneously employing both the incentive alignment (executive pay) and monitoring mechanisms (corporate governance) by firms to reduce agency conflicts (Ntim et al ., , ). Arguably, this may explain the observably weak PPS reported by past studies and may also limit current understanding of the extent to which firm‐level corporate governance quality can moderate the link between executive pay and firm performance.…”

“…Arguably, this may explain the observably weak PPS reported by past studies and may also limit current understanding of the extent to which firm‐level corporate governance quality can moderate the link between executive pay and firm performance. Finally, and despite the theoretical and empirical suggestions that most corporate decisions, including executive pay is mainly a function of top management team and ownership structure (Ntim et al ., , ), there is a clear dearth of studies examining how board structure, CEO power and ownership structure variables may affect executive pay. Arguably, this also limits our understanding of the extent to which board structure, CEO power and ownership mechanisms can impact executive pay.…”

Board diversity, corporate governance, corporate performance, and executive pay

“…Both internal CG mechanisms (as monitoring mechanisms) and EP contracts (for alignment of interests) can be used by modern organizations to limit the implications of agency conflict (Chen, Lin, Lu, & Zhang, 2015;Liu et al, 2017;Ntim, Lindop, et al, 2015;Ntim, Opong, et al, 2015). A number of previous studies have recognized the importance of controlling for a comprehensive number of internal CG variables (e.g., board characteristics and shareholding structure mechanisms) when investigating the association between EP and firm performance (e.g., Liu et al, 2017;Newton, 2015;Ntim, Lindop, et al, 2015;Ntim, Opong, et al, 2015). A major limitation of these studies is that they undermine possible endogeneity concerns of simultaneous use of both CG mechanisms and EP to mitigate agency problems (Chen et al, 2015;Ntim, Lindop, et al, 2015;Ntim, Opong, et al, 2015).…”