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Influence of Firm Size on CEOs Compensation

Received: 5 February 2021     Accepted: 17 February 2021     Published: 27 February 2021
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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.

Published in Journal of Business and Economic Development (Volume 6, Issue 1)
DOI 10.11648/j.jbed.20210601.13
Page(s) 23-29
Creative Commons

This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.

Copyright

Copyright © The Author(s), 2021. Published by Science Publishing Group

Keywords

Firm Size, CEO Compensation, Nairobi Securities Exchange, Performance, Firm Characteristics

References
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[18] Epstein, M and Roy, M. (2002). Measuring and improving the Performance of Corporate Board. The Society of Management Accountants of Canada, Hamilton.
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[20] Farmer, M. (2008). Chief Executive Compensation and Company Performance: a weak relationship or measurement weaknesses? Kingston University, UK.
[21] Finkelstein, S. & Hambrick D. C., (1989). Chief Executive Compensation: a study of the intersection of markets and political processes, Strategic Management Journal Vol. 10.
[22] Fleming, G., & Stellios, G. (2002). CEO compensation, Managerial Agency and boards of directors in Australia. Accounting Research Journal, 15 (2), 126-145.
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Cite This Article
  • APA Style

    Omamo Anne, Peter K’obonyo, Florence Muindi. (2021). Influence of Firm Size on CEOs Compensation. Journal of Business and Economic Development, 6(1), 23-29. https://doi.org/10.11648/j.jbed.20210601.13

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    ACS Style

    Omamo Anne; Peter K’obonyo; Florence Muindi. Influence of Firm Size on CEOs Compensation. J. Bus. Econ. Dev. 2021, 6(1), 23-29. doi: 10.11648/j.jbed.20210601.13

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    AMA Style

    Omamo Anne, Peter K’obonyo, Florence Muindi. Influence of Firm Size on CEOs Compensation. J Bus Econ Dev. 2021;6(1):23-29. doi: 10.11648/j.jbed.20210601.13

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  • @article{10.11648/j.jbed.20210601.13,
      author = {Omamo Anne and Peter K’obonyo and Florence Muindi},
      title = {Influence of Firm Size on CEOs Compensation},
      journal = {Journal of Business and Economic Development},
      volume = {6},
      number = {1},
      pages = {23-29},
      doi = {10.11648/j.jbed.20210601.13},
      url = {https://doi.org/10.11648/j.jbed.20210601.13},
      eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.jbed.20210601.13},
      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.},
     year = {2021}
    }
    

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    AU  - Omamo Anne
    AU  - Peter K’obonyo
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    T2  - Journal of Business and Economic Development
    JF  - Journal of Business and Economic Development
    JO  - Journal of Business and Economic Development
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    PB  - Science Publishing Group
    SN  - 2637-3874
    UR  - https://doi.org/10.11648/j.jbed.20210601.13
    AB  - 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.
    VL  - 6
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Author Information
  • School of Business, Jomo Kenyatta University of Agriculture and Technology, Nairobi, Kenya

  • School of Business, University of Nairobi, Nairobi, Kenya

  • School of Business, University of Nairobi, Nairobi, Kenya

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