Pay-performance sensitivity and corporate governance mechanisms: evidence from Tunisia

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Meriem Ghrab ◽  
Marjène Gana ◽  
Mejda Dakhlaoui
Keyword(s):  
Corporate Governance ◽  
Firm Performance ◽  
Pay For Performance ◽  
Simultaneous Equation ◽  
Executive Pay ◽  
Estimation Model ◽  
Content Type ◽  
Explanatory Variables ◽  
Performance Sensitivity ◽  
Ceo Pay

Purpose The purpose of this study is to analyze the CEO compensation sensitivity to firm performance, termed as the pay-for-performance sensitivity (PPS) in the Tunisian context and to test the robustness of this relationship when corporate governance (CG) mechanisms are considered. Design/methodology/approach The consideration of past executive pay as one of the explanatory variables makes this estimation model a dynamic one. Furthermore, to avoid the problem of endogeneity, this study uses the system-GMM estimator developed by Blundell and Bond (1998). For robustness check, this study aims to use a simultaneous equation approach (three-stage least squares [3SLS]) to estimate the link between performance and CEO pay with a set of CG mechanisms to control for possible simultaneous interdependencies. Findings Using a sample of 336 firm-years from Tunisia over the 2009–2015 periods, this study finds strong evidence that the pay-performance relationship is insignificant and negative, and it becomes more negative or remains insignificant after introducing CG mechanisms consistently with the managerial power approach. The findings are robust to the use of alternative performance measures. This study provides new empirical evidence that CEOs of Tunisian firms abuse extracting rents independently of firm performance. Originality/value This study contributes to the unexamined research on PPS in a frontier market. This study also shows the ineffectiveness of the Tunisian CG structure and thus recommends for the legislator to impose a mandatory CG guide.

scholarly journals Corporate governance and theories of executive pay

2003 ◽  
Vol 1 (2) ◽  
pp. 94-105 ◽  
Author(s):  
Kuntara Pukthuanthong ◽  
Eli Talmor ◽  
James S. Wallace
Keyword(s):  
Corporate Governance ◽  
Firm Performance ◽  
Ownership Structure ◽  
Ceo Compensation ◽  
Pay For Performance ◽  
Task Complexity ◽  
Stock Ownership ◽  
Executive Pay ◽  
The U.S ◽  
And Task

This study performs an in-depth look at the corporate governance, voting and ownership structure of the companies selected using a relatively homogenous data of the U.S. financial sector. Variables that proxy for managerial strategic discretion and task complexity are found to best explain CEO compensation. Corporate governance, including board characteristics and ownership structure, is the second leading determinant of pay variation, while firm performance and CEO specific characteristics seem to play the least role. In accord with studies on managerial stock ownership and Tobin’s Q, the pay-for-performance relation appears to be curvilinear in CEO stock ownership

Executive compensation and securitization: pre-and post-crisis

2014 ◽  
Vol 15 (4) ◽  
pp. 437-457 ◽  
Author(s):  
Elizabeth Cooper ◽  
Andrew Kish
Keyword(s):  
Executive Compensation ◽  
Pay For Performance ◽  
Chief Executive ◽  
Executive Pay ◽  
Pay Gap ◽  
Content Type ◽  
Ceo Pay ◽  
The Difference ◽  
Recent Financial Crisis ◽  
The Relationship

Purpose – The purpose of this paper is to study bank executive compensation and securitization, two important strategic developments in finance that are central to the debate on the cause of the crisis. Design/methodology/approach – We study the relationship between securitization and executive pay in a sample of US banks from 2001 to 2010, using a series of multivariate regression models to test our hypotheses. Findings – Bank Chief Executive Officer (CEO) pay exhibits a positive pay-for-performance relationship. Since the crisis, this relationship is weakened. For banks that securitize, we find that prior to the crisis, higher securitization activity led to higher CEO compensation levels. While we do not find that securitization is related to bank CEO pay gap (the difference between CEO and the next-highest paid bank executive), we do see that bank ratings are a factor in pay gap and compensation level. Research limitations/implications – Bank regulatory ratings influence the relationship between compensation and securitization. Also, the relationship differs pre- and post-crisis. Originality/value – Our study is unique for several reasons. First, we look at the relationship between compensation and securitization over a time period that includes the recent financial crisis. Second, we include an analysis of pay gap. Third, we include bank regulatory ratings, which are proprietary and therefore not available for use in many banking studies.

The drivers of corporate governance disclosure: the case of Nifty 500 Index

2018 ◽  
Vol 60 (2) ◽  
pp. 681-700 ◽  
Author(s):  
Androniki Katarachia ◽  
Electra Pitoska ◽  
Grigoris Giannarakis ◽  
Elpida Poutoglidou
Keyword(s):  
Corporate Governance ◽  
Financial Leverage ◽  
Policy Makers ◽  
Content Type ◽  
Explanatory Variables ◽  
Size Number ◽  
Governance Practices ◽  
Board Director ◽  
First Time ◽  
Governance Disclosure

Purpose Based on agency theory, the purpose of this paper is to investigate the determinants on the dissemination level of corporate governance disclosure (CGD). Design/methodology/approach The sample of the study incorporates listed companies in Nifty 500 Index for the period 2009-2014. The Governance Disclosure Score calculated by Bloomberg is used as a proxy for the dissemination level of corporate governance information. In total, eight explanatory variables are uses, namely, board’s size, number of board meetings, CEO duality, presence of women on the board, company’s size, financial performance, Tobin’s Q ratio and financial leverage. Findings The results of study suggest a need for improvement in CGDs by Indian companies, as they fail to comply the majority of the proposed disclosure items. Furthermore, it is revealed that the number of board director, the value of company, the financial leverage and the presence of women affect negatively the dissemination level of corporate governance information. While, the size of company is the only determinant that positively affects the extent of CGD. Practical implications The results are valuable because they reveal the attributes that determines which companies needs less or extra monitoring by shareholders and investors regarding the applied corporate governance practices. In addition, the study can be valuable to policy makers responsible for the regulation of company’s accountability in relation to corporate governance practices. Originality/value The study extents previous studies by incorporating for the first time Bloomberg’s rating approach regarding the dissemination level of CGD in Indian context.

Corporate governance and firm performance: empirical evidence from Pakistan

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Muhammad Farooq ◽  
Amna Noor ◽  
Shoukat Ali
Keyword(s):  
Corporate Governance ◽  
Firm Performance ◽  
Firm Size ◽  
Good Governance ◽  
Positive Impact ◽  
Least Square ◽  
Local Context ◽  
Content Type ◽  
Governance Index ◽  
Governance Quality

Purpose The purpose of this research is to look into the governance–performance relationship in the context of critical firm characteristics, such as firm size. Design/methodology/approach Based on total assets, sample firms were classified as small or large. The governance index, which is based on 29 governance provisions covering the audit committee, board committee, ownership and compensation structure of the respective firm, measures governance quality among sample firms. A higher governance index indicates a higher level of governance quality and vice versa. Accounting and market value measures are used to determine firm profitability. The authors used the two-stage least square (2SLS) method of estimation of the model to eliminate the simultaneous equation bias. Findings Corporate governance (CG) appears to have a positive impact on accounting return and market indices (Tobin’s Q), but it has little impact on return on equity. In terms of firm size, larger companies profited more from better governance implementation than smaller firms that lacked these principles, thus improving CG. The findings indicate that small businesses should improve their governance mechanisms to reap the benefits of CG in terms of increased profitability. Research limitations/implications There are certain drawbacks to this research. First, the authors omitted qualitative aspects of CG from the CG index, such as the board’s decision-making process, directors’ perceptions of the board’s position and directors’ age and qualifications. Such a qualitative component will improve the governance index in the future while building the governance index. Second, as the current study only looks at the nonfinancial sector, caution should be exercised before applying the findings to the entire population. Practical implications The findings show that companies that follow good governance standards have better accounting and market efficiency than those that do not. As a result, good governance practices can help firms in developing countries improve their performance. Academic researchers, regulators, investors, lenders and practitioners can find the findings useful in establishing a true relationship between firm performance and CG practices in Pakistan. Originality/value The relationship between governance and profitability in the context of firm size is examined in this research. Firms with varying resources and ability to implement CG codes have varying effects on profitability. To the authors’ knowledge, there was a gap in the literature that addressed this topic in the local context.

Corporate governance practices and firm performance: a configurational analysis across corporate life cycles

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Hala M. Amin ◽  
Ehab K.A. Mohamed ◽  
Mostaq M. Hussain
Keyword(s):  
Corporate Governance ◽  
Firm Performance ◽  
Analytical Approach ◽  
Research Study ◽  
Performance Outcomes ◽  
Life Cycles ◽  
Related Activity ◽  
Content Type ◽  
And Performance ◽  
Country Specific

Purpose This study aims to explore corporate governance (CG) practices that can lead to firms’ better performance in different organizational life cycles. The authors propose a configurational approach to explore how a set of CG practices combine in bundles to achieve high performance outcomes for firms across their corporate life cycles. Design/methodology/approach Fuzzy-set qualitative comparative analysis was used to analyze a sample of data of 21 countries and 9 industries. Data referred to the period of 9 years extending from the year 2005 to the year 2013. Findings This study reveals that there are multiple CG practices that exist through firms that can achieve high firm performance. Moreover, CG practices combine in different ways for firms in their growth, maturity and declining stages. Research limitations/implications This study demonstrates the value of using a configurational analytical approach to explore both the firm and country-specific CG practices (together) that engage firms to achieve the desired level of performance across the corporate life cycles. Practical implications The current study draws attention to the policymakers’ need to assess the current level of regulatory and competitive development of their countries and form policy accordingly. The approach used in the current research study not only offers the linkages between CG and performance to managers as incentives to comply with regulation but also to view CG-related activity as a strategic move. Social implications The approach used in the current research study not only offers the linkages between CG and performance to managers as incentives to comply with regulation but also to view CG-related activity as a strategic move. Originality/value This study broadening the focus of CG studies to include a rigorous explanation of the global CG phenomena and to provide effective solutions for the practitioners. Contribution to Impact This study demonstrates the value of using a configurational analytical approach to explore both the firm and country-specific CG practices (together) that engage firms to achieve the desired level of performance across the corporate life cycles.

Corporate governance, globalization and firm performance in emerging economies

2018 ◽  
Vol 67 (8) ◽  
pp. 1310-1333 ◽  
Author(s):  
Neha Saini ◽  
Monica Singhania
Keyword(s):  
Corporate Governance ◽  
Firm Performance ◽  
Panel Data ◽  
Foreign Capital ◽  
Good Governance ◽  
Foreign Ownership ◽  
Foreign Firms ◽  
Content Type ◽  
Governance Practices ◽  
The Relationship

PurposeThe purpose of this paper is to examine relationship between corporate governance (CG) and firm performance for a set of 255 foreign-funded firms in the form of foreign direct investment (FDI) and private equity (PE). The authors employ a wide range of CG measures including board size, meetings, board gender and foreign ownership which are used as the proxy of globalisation and control variables like firm age, leverage, firm size and capital expenditure to arrive at a conclusion.Design/methodology/approachPanel data set of 255 (187 companies funded by foreign capital in the form of FDI, and 68 companies having foreign capital in the form PE) companies listed on Bombay Stock Exchange, for the period of eight years (2008–2015) are analysed by using static (fixed and random effects) and dynamic (generalised method of moments (GMM)) panel data specifications to examine the relationship among CG, globalisation and firm performance.FindingsThe empirical results of static model indicate the relationship between CG and performance of foreign firms, which are not very strong in India. This is due to the fact that most of the firms are not following the guidelines and regulations strictly in the initial period of sample years. Diversity in board is found as an important variable in accessing firm performance. And the authors also found that foreign firms are very particular about the implementation of CG norms. The results of GMM model highlight the interaction term of foreign ownership with governance indicators. CG is having a positive and significant impact over performance, inferring that higher foreign ownership (in the form of FDI and PE) in firm leading to positive effect on profitability.Practical implicationsThe investor’s preference of financing a unit is guided by the performance of a firm. Investors are more inclined towards high-performing firms, and hence higher profitability leads to higher inflow of capital. The result indicates that higher accounting and market performance may be achieved by good governance practices, in turn, leading to reduced agency costs. Countries with high governance scores attract more of foreign capital. Similar to the best governed countries, the companies having good governance practices attract more foreign inflows in the form of capital.Originality/valueWhile previous literature considered a single measurement framework in the form of a CG index, the authors tried to incorporate a range of CG indicators to study the effect of globalisation and CG on firm performance. The authors segregated foreign-owned funds into two parts, especially FDI and PE. This paper examined heterogeneity in the form of FDI-funded and PE-funded firms, as no prior literature is available which has evaluated different sets of foreign funds simultaneously on CG.

The role of national culture in the impact of board gender diversity on firm performance: evidence from a multi-country study

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Navaz Naghavi ◽  
Saeed Pahlevan Sharif ◽  
Hafezali Bin Iqbal Hussain
Keyword(s):  
Corporate Governance ◽  
Firm Performance ◽  
Generalized Method Of Moments ◽  
Gender Diversity ◽  
Governance Structure ◽  
Corporate Governance Structure ◽  
Data Set ◽  
Content Type ◽  
Board Gender Diversity ◽  
The Impact

PurposeThis study seeks to add more insights to the debate on “whether”, “how”, and “under which condition” women representation on the board contributes to firm performance. More specifically, the current study aims to investigate if the effect of board gender diversity on firm performance is dependent on macro factors of national cultures.Design/methodology/approachThe authors used the generalized method of moments regression and a data set consists of 2,550 company year observations over 10 years.FindingsThe results indicated that cultural variables interact with board diversity to influence firm performance. Having women on the board in countries with high power distance, individualist, masculine and low-uncertainty avoidance culture influences the firm performance negatively.Originality/valueThe findings indicate that the effects of corporate governance structure on firm performance depends on culture-specific factors, providing support for the argument that institutional norms that are governed by cultural norms affect the effectiveness of corporate governance structure.

Corporate governance and underpricing of small and medium enterprises IPOs in India

2020 ◽  
Vol 20 (3) ◽  
pp. 503-525
Author(s):  
Nischay Arora ◽  
Balwinder Singh
Keyword(s):  
Corporate Governance ◽  
Small And Medium Enterprises ◽  
Curvilinear Relationship ◽  
Board Structure ◽  
Governance Mechanisms ◽  
Content Type ◽  
Explanatory Variables ◽  
Corporate Governance Mechanisms ◽  
Medium Enterprises ◽  
The Impact

Purpose The purpose of the paper is to examine the impact of corporate governance mechanisms, i.e. board structure and ownership structure on the underpricing of small and medium enterprises (SME) IPOs in India. Design/methodology/approach Most of the extant empirical research studies have either pivoted on mainstream IPOs or SMEs IPOs in developed economies, but the present study examines 200 SME IPOs issued during Feb 2012 to April 2017. Multiple regressions have been used to examine the impact of the corporate governance mechanisms on raw return (RR). Furthermore, robustness of the results has been verified through the employment of market-adjusted excess return (MAER) as an additional proxy of underpricing. Findings The results highlight that board size, inverse of board committees, board independence, board age, board directorships positively, and top ten shareholding negatively influence RR. Further, direction of promoter ownership variable indicates curvilinear relationship with underpricing. Other explanatory variables used in model lack statistical validity. Similar results have been obtained when variables were regressed against MAER with related board members being additionally significant in model. Practical implications The findings suggest that Indian investors do take cues from board structure and ownership patterns for making investment decisions in small- and medium-sized firms. Further, the results are also helpful to top management in structuring their boards. Originality/value The present research enriches SME IPOs underpricing literature because the impact of corporate governance mechanisms on unadjusted returns is relatively under explored particularly within the context of small- and medium-sized firms.

scholarly journals The board of directors and firm performance: empirical evidence from listed companies

2019 ◽  
Vol 19 (3) ◽  
pp. 508-551 ◽  
Author(s):  
Alessandro Merendino ◽  
Rob Melville
Keyword(s):  
Corporate Governance ◽  
Firm Performance ◽  
Agency Theory ◽  
Ownership Structure ◽  
Listed Companies ◽  
Independent Directors ◽  
Board Structure ◽  
Board Size ◽  
Ceo Duality ◽  
Content Type

PurposeThis study aims to reconcile some of the conflicting results in prior studies of the board structure–firm performance relationship and to evaluate the effectiveness and applicability of agency theory in the specific context of Italian corporate governance practice.Design/methodology/approachThis research applies a dynamic generalised method of moments on a sample of Italian listed companies over the period 2003-2015. Proxies for corporate governance mechanisms are the board size, the level of board independence, ownership structure, shareholder agreements and CEO–chairman leadership.FindingsWhile directors elected by minority shareholders are not able to impact performance, independent directors do have a non-linear effect on performance. Board size has a positive effect on firm performance for lower levels of board size. Ownership structure per se and shareholder agreements do not affect firm performance.Research limitations/implicationsThis paper contributes to the literature on agency theory by reconciling some of the conflicting results inherent in the board structure–performance relationship. Firm performance is not necessarily improved by having a high number of independent directors on the board. Ownership structure and composition do not affect firm performance; therefore, greater monitoring provided by concentrated ownership does not necessarily lead to stronger firm performance.Practical implicationsThis paper suggests that Italian corporate governance law should improve the rules and effectiveness of minority directors by analysing whether they are able to impede the main shareholders to expropriate private benefits on the expenses of the minority. The legislator should not impose any restrictive regulations with regard to CEO duality, as the influence of CEO duality on performance may vary with respect to the unique characteristics of each company.Originality/valueThe results enrich the understanding of the applicability of agency theory in listed companies, especially in Italy. Additionally, this paper provides a comprehensive synthesis of research evidence of agency theory studies.

scholarly journals A Literature Review of the Perspectives of CEO Pay: An Analysis of Issues and Controversies

2018 ◽  
Vol 8 (4) ◽  
pp. 44
Author(s):  
Faitira Manuere ◽  
Precious Hove
Keyword(s):  
Corporate Governance ◽  
Literature Review ◽  
Executive Compensation ◽  
Ceo Compensation ◽  
Executive Pay ◽  
The Core ◽  
Good Corporate Governance ◽  
Ceo Pay ◽  
Conceptual Background

The purpose of this paper is to review the literature on various theories that are used in organisations today to determine executive compensation. This paper analyses the relevance of the theories that are used to determine CEO compensation in modern corporations. The paper makes an attempt to review extensively the literature on CEO compensation. This paper looks at the concerns of sixteen theories of executive compensation. This paper further analyses the special features that are associated with CEO pay. These features help us to understand the problems that experts on executive pay experience when they try to define the exact CEO pay when compared to other rewards that are non financial. The drivers of executive pay are quantified and qualified in order to provide the conceptual background needed to understand the core factors that determine executive pay. Therefore the role of institutional investors in driving managerial salary is explored in detail. Finally, the effects of firm size and good corporate governance on executive pay are carefully analysed.

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