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CEO compensation, firm performance, board structure and financial constraints: evidence from an emerging economy

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  • Pankaj Chaudhary

Abstract

This paper explores the relationship between CEO compensation and firm performance. In addition, the paper analyses board structure to understand its influence on the CEO compensation. Further, it also examines how the financial constraint affects these relationships. The paper finds that the accounting-based measures of firm performance are positively related to the contemporaneous CEO compensation. The future CEO compensation is positively associated with accounting-based and market-based measures of firm performance. It indicates that the reward of market-based performances is derived in the future by the CEOs. It is interesting to note that board independence has a negative effect on the present and future CEO compensation under a financially constrained scenario. Investors need to be especially careful in a financially constrained scenario, as the CEO with dual power can extract higher compensation at the expense of the interest of the shareholders.

Suggested Citation

  • Pankaj Chaudhary, 2024. "CEO compensation, firm performance, board structure and financial constraints: evidence from an emerging economy," Afro-Asian Journal of Finance and Accounting, Inderscience Enterprises Ltd, vol. 14(5), pages 684-707.
    • Handle: RePEc:ids:afasfa:v:14:y:2024:i:5:p:684-707
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