CEO Cash Compensation and Firm Performance: An Empirical Study from Emerging Markets

Abstract

The primary objective of this study is to examine whether the CEO's cash compensation is influenced by the firm’s performance or whether the inverse relationship exists, where the CEO's bonus rather has a positive effect on company performance. The study includes an examination of firms listed on six emerging countries financial markets, and includes separate statistical tests on firms of different sizes and different industry sector. The findings of the study demonstrate that there is no relationship between CEO cash compensation and performance among the firms included in this study. Notwithstanding, some other incentive variables have been found as important performance boosters among companies in certain sectors. This study has been able to establish that some theories of incentive contracts hold true among firms of certain sizes as well as among firms from certain industries.