Executive Pay-Performance Relationship Among Listed Deposit Money Banks in Nigeria

Abstract

This paper examines the executive pay-performance relationship among listed deposit money banks in Nigeria. It also investigates other possible determinants of executive pay, as well as factors that moderate the pay-performance relationship. Results from the dynamic panel GMM regression indicate that excessive pay does not match performance, as pay rises with declining performance. Other factors that explain the executive pay of the sampled banks include board size, board independence and CEO ownership. Findings further reveal that the pay-performance relationship is negatively moderated by board independence, as executive pay is found to rise with increase in performance when there are more independent directors on the board. The study findings provide support for the managerial power hypothesis. However, no evidence is found in support of the agency theory.