The Nexus between Managerial Compensation and Performance: Evidence from Banking Sector in Pakistan
Keywords:Bank performance, CEO compensation, Panel data, Pakistan
Purpose: This study intends to investigate the relationship between bank performance and managerial compensation. The study is in aligned with the prior literature and adds an insight for the baking sector of Pakistan in this direction,
Design and Methodology: The study uses return on equity to gauge the bank performance and managerial compensation which includes the bonuses and total salary paid to CEO. For this purpose, a sample of twenty-eight banks for the period of twelve years i.e. 2009 to 2021 has been considered. Panel data estimation models have been employed for the purpose of analysis.
Findings: The findings of the study shows a positive relationship between the bank performance and CEO compensation. Our results are aligned with the agency theory and emphasis on market competitive salary for the CEO.
Implications: Our study complements the previously available literature that in order to minimize the agency problem, CEO should be paid adequately that impacted banks performance positively.
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