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Firm performance, corporate governance and executive compensation in Pakistan

Sheikh, Muhammad Fayyaz; Shah, Syed Zulfiqar Ali; Akbar, Saeed


Muhammad Fayyaz Sheikh

Syed Zulfiqar Ali Shah

Saeed Akbar


© 2017 Informa UK Limited, trading as Taylor & Francis Group This study examines the effects of firm performance and corporate governance on chief executive officer (CEO) compensation in an emerging market, Pakistan. Using a more robust Generalized Method of Moments (GMM) estimation approach for a sample of non-financial firms listed at Karachi Stock Exchange over the period 2005–2012, we find that both current- and previous-year accounting performances has positive influence on CEO compensation. However, stock market performance does not appear to have a positive impact on executive compensation. We further find that ownership concentration is positively related with CEO compensation, indicating some kind of collusion between management and largest shareholder to get personal benefits. Inconsistent with agency theory, CEO duality appears to have a negative influence, while board size and board independence have no convincing relationship with CEO compensation, indicating board ineffectiveness in reducing CEO entrenchment. The results of dynamic GMM model suggest that CEO pay is highly persistent and takes time to adjust to long-run equilibrium.


Sheikh, M. F., Shah, S. Z. A., & Akbar, S. (2018). Firm performance, corporate governance and executive compensation in Pakistan. Applied economics, 50(18), 2012-2027.

Journal Article Type Article
Acceptance Date Sep 27, 2017
Online Publication Date Oct 9, 2017
Publication Date Apr 15, 2018
Deposit Date Sep 18, 2018
Publicly Available Date Oct 27, 2022
Journal Applied Economics
Print ISSN 0003-6846
Electronic ISSN 1466-4283
Publisher Routledge
Peer Reviewed Peer Reviewed
Volume 50
Issue 18
Pages 2012-2027
Keywords Corporate governance; Dynamic panel; Emerging markets; Executive compensation; Firm performance; Fixed effects
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