The threshold effect of executive compensation on organisational performance in the Nigerian insurance industry

Download This Article

This work is licensed under a Creative Commons Attribution 4.0 International License.

Abstract

This study investigates the threshold effects of executive compensation on both financial and non-financial performance in the Nigerian insurance industry. Using panel data from 16 quoted Nigerian insurance companies (2010–2022), the study employs a dynamic panel threshold regression framework based on the generalised method of moments (GMM). The results reveal inverted U-shaped relationships across all metrics. Moderate increases in executive pay enhance profitability and market valuation, but excessive compensation leads to diminishing returns. Threshold points were identified at 202 per cent for return on assets (ROA), 273 per cent for Tobin’s Q (TOQ), and 544 per cent for corporate social responsibility (CSR). The findings suggest that boards should avoid open-ended incentive structures. Regulators can use these thresholds as benchmarks for assessing corporate governance quality and preventing rent-seeking behaviour. This study provides an empirical application of dynamic panel threshold regression to analyse executive compensation in the under-researched Nigerian insurance sector. By identifying specific inflection points for financial efficiency (ROA), market valuation (Tobin’s Q), and social legitimacy (CSR), the research moves beyond the traditional linear pay-performance debate. It offers a unique evidence-based framework for regulators like the National Insurance Commission (NAICOM) and corporate boards to optimize executive rewards, ensuring they incentivize performance without triggering managerial entrenchment or governance breakdown in a volatile emerging market.

Keywords: Corporate Governance, Corporate Social Responsibility (CSR), Dynamic Panel Threshold Regression, Executive Compensation, Generalised Method of Moments (GMM), Nigerian Insurance Industry

Authors’ individual contribution: The Author is responsible for all the contributions to the paper according to CRediT (Contributor Roles Taxonomy) standards.

Declaration of conflicting interests: The Author declares that there is no conflict of interest.

JEL Classification: D21, D22, G30, G32, L25, M12, M41

Received: 04.02.2026
Revised: 18.03.2026; 26.03.2026
Accepted: 03.04.2026
Published online: 07.04.2026

How to cite this paper: Lawuyi, R. (2026). The threshold effect of executive compensation on organisational performance in the Nigerian insurance industry. Corporate Ownership & Control, 23(2), 8–17. https://doi.org/10.22495/cocv23i2art1