Influence of Firm Size on CEOs Compensation

Abstract

This study focused its attention to the link among firm size and CEO compensation of firms listed at the NSE.Previous researchers have identified firm's characteristics that influence the firm's ability to perform. The identified characteristics include firm size, age, reputation and legitimacy. A firm's characteristics could be described through reference to resources the firm owns and by the organization's objectives. Previous researches examined the factors influencing CEO compensation revealed a lack of consensus to the explanation of increases in CEO'S compensation. While most of the studies confirm linkages between organizational performance and CEO compensation, they measured organizational performance using financial indicators of performance, this study investigates the link between firm size and CEOs compensation. The study's population constituted 40 firms listed at the NSE. A mixed design was adopted in the study. Primary data was gathered to capture the opinion of board members on firm size characteristics that determine levels of CEO'S compensation using semi structured questionnaire. Secondary sources of data were used to gather information on financial performance from the financial statement of the listed organizations for 2016-2017 financial periods. Descriptive statistics, correlations, linear, multiple and stepwise regression were applied in analyzing and interpreting the data that was collected. The research revealed that there was significant and positive relationship between firm size and CEOs compensation. The findings of this study are of benefit to board members of organizations in identifying the performance measures that are important to consider when making decisions on CEO remuneration.

Window dressing in the banking sector of an emerging economy: evidence from aggregate data

“…The first incentive is that, as far as managers are concerned, big size means big salaries and enhanced employment opportunities. Evidence for a positive correlation between executive compensation and bank size is provided by Cole (1987), Liscio (1987), and (more recently) by Katum (2015), Yang et al (2020) and Anne et al (2021). Allen and Saunders (1992) suggest that there is an imperfect and heterogeneous labour market for bank managers in which compensation is linked to bank size.…”