Executive compensation and corporate performance: Evidence from Jordanian commercial banks

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Abstract

The wave of the recent financial crisis has reawakened interest in corporate governance as well as the relationship between executive compensation and corporate performance. Notably, corporate governance has been presented as a mechanism to absorb fiscal crisis faced in emerging economies. The principal aim of this study is to investigate the relationship between CEO compensation and corporate performance among commercial banks operating in a small emerging market, namely Jordan. Primary data were collected for a sample of 13 Jordanian commercial banks listed at Amman Stock Exchange (ASE) during the period of 2010 -2016. The findings of this paper suggest that corporate performance measured by return on equity (ROE) and return on assets (ROA) has no influence on CEO compensation. Furthermore, this paper examines the impact of a firm’s size on the relationship between CEO compensation and corporate performance. The results reveal a significant relationship between executive compensation and firm’s performance among the smaller sample firms.

Keywords: Executive Compensation, Firm Performance, Commercial Banks, Jordan, Board of Directors, Corporate Governance

JEL Classification: G23, G32, M12, G34, Z31

Received: 14.05.2018

Accepted: 06.07.2018

Published online: 20.07.2018

How to cite this paper: Iskandrani, M., Yaseen, H., & Al-Amarneh, A. (2018). Executive compensation and corporate performance: Evidence from Jordanian commercial banks. Corporate Board: Role, Duties and Composition, 14(2), 38-44. https://doi.org/10.22495/cbv14i2art4