Executive Pay Composition and Corporate Financial Health Maximisation

Abstract

This study examined the relationship between executive pay composition and corporate financial health maximisation in Nigeria. Secondary data was obtained from the annual reports and accounts and Nigerian Stock Exchange Fact-book during the period 2008-2017 and ordinary least square was employed in the analysis of data. Net interest margin, return on asset and return on equity were operationalized as proxies for corporate financial health maximisation while bonus scheme as proxy for executive pay composition. The study found an executive pay package comprising of a bonus scheme is likely to influence managers to behave in a manner that would ensure the overall wellbeing of the organization. The study recommends that a bonus scheme should be a major component of executive composition as not a way of managing agency cost but also as a tool for instigating managerial behaviour that would enhance overall wellbeing of the organization.

Keywords: Executive pay composition, Corporate financial health maximisation, Bonus scheme

DOI: 10.7176/RJFA/10-22-05

Publication date: November 30^th 2019