CEO compensation and firm performance

Abstract

PurposeThe purpose of this paper is to examine the relation between chief executive officer (CEO) compensation and firm performance proxied by efficiency estimated from data envelopment analysis (DEA) of the US property‐liability (P&L) insurance industry.Design/methodology/approachThis study was conducted in two stages. First the authors applied DEA model to calculate efficiency scores. In the second stage, a translog model was used to correlate the level and structure of CEO compensation and the efficiency for the sample P&L insurers over the period of 2000‐2006.FindingsFirm efficiency is positively and significantly associated with total CEO compensation. While revenue efficiency is associated with CEO cash compensation, cost efficiency is associated with incentive compensation.Practical implicationsThese findings suggest that while CEO compensation is tied to both revenue and cost efficiency, revenue efficiency is more important in determining cash compensation, and cost efficiency is more prevalent in influencing incentive compensation.Originality/valueThis is the first paper to use efficiency scores as proxies for firm performance to explore the relation between CEO compensation and firm performance in the P&L insurance industry. Due to the nature of insurance business, using efficiency as a performance measurement is more appropriate than accounting and financial ratios since it enables us to net out the effects of differences in exogenous firm‐specific conditions that are beyond management's control.

Executive remuneration, corporate governance and corporate performance: Evidence from China

“…The following linear model has been formulated to test the static compensation process through the estimated relationship of executives' remuneration with selected corporate governance elements and firm performance following existing literature (Gallego & Larrain, 2012;Sheikh et al, 2018;Sun et al, 2013).…”

The effect of compensation on accounting fraud with the genders variety of directors as a moderation variable

“…(Liao et al, 2019) on the influence of gender on the CFO accounting fraud in China period 2003 to 2015 gives the result that the CFO of women has a negative influence on accounting fraud in the company. The research of (Sun et al, 2013) on the effect of gender CFO on accounting reporting fraud shows that female CFO is less related to accounting reporting fraud. The results of research on gender in this study are in line with (Peni & Vähämaa, 2010) which show that female CEOs do not have a significant influence on earnings management which can lead to accounting fraud.…”

“…Research by (Liao et al, 2019) on the influence of gender on the CFO accounting fraud in China period 2003 to 2015 gives the result that the CFO of women has a negative influence on accounting fraud in the company. The research of (Sun, Wei, & Huang, 2013) on the effect of gender CFO on accounting reporting fraud shows that female CFO is less related to accounting reporting fraud. Based on the theory and empirical results of previous studies that have been explained above, female directors are more able to reduce accounting fraud, the research hypothesis is stated as follows.…”

The Remuneration Factor Of Sharia Banking Corporate Governance

“…Based on the Hypothesis Test, the results of this study are in line with previous studies namely, the research of Utami [20], Hikmah Endraswati [21] which shows that the size and level of attendance of the board of commissioners at a meeting has an effect on remuneration. Then the research Yang, et al [8], Erick, et al [1], Vemala, et al [4], Bizjak et al [2], Lam, et al [3], Mardiyati, et al [5], Banker, Huang, and Plehn-Dujowich [6], F. Sun, Wei, and Huang [7], Rashid [9], Conyon and He [11], Darmadi [29] Sun et al [7], which revealed that the company's performance was positively related to the level of remuneration. So it can be concluded in this study that factors affecting teh remuneration of corporate governance include the frequency of corporate governance meetings (Board of Commissioners, Board of Directors, Sharia Supervisory Board), company performance as measured by bank soundness then inflation rate, and exchange rate.…”

“…There are several studies linking company performance with remuneration including the research conducted by Erick, et al [1], Anggraini et al [2], Bizjak et al [2], Lam, et al [3], Vemala, et al [4], Mardiyati, et al [5], Banker, Huang, and Plehn-Dujowich [6], F. Sun, Wei, and Huang [7], Yang, et al [8], Rashid [9], Lee [10], Conyon and Darmadi [11], and the results of these studies reveal that company performance is positively related to remuneration levels. Unlike the case with the results of research by Rost and Osteroh [12], Usman [13] shows that company performance is negatively related to remuneration; and the results of research Suherman, et al [14] shows that company performance as measured by Tobin's Q has no significant effect on compensation received by executives.…”