Journal of International Business Research (Print ISSN: 1544-0222; Online ISSN: 1544-0230 )

Abstract

Value of Listed DMBs in Nigeria: Does Share Ownership Moderates Executive Compensation and Financial Performance Relationship?

Author(s): Aliyu Sulaiman Kantudu, Ahmed Abubakar Zik-Rullahi

The increasing failure of banks has made it important to seek for ways to enhance its value in order to attract investors and potential investors. To make this reality, scholars have argued from various quarters that the people who manage the banks must be adequately compensated if the desired value needs to be achieved. Therefore, the study examines the moderating effect of share ownership on the relationship between executive compensation and value of listed deposit money banks (DMB) in Nigeria. The study adopted correlational research design with balanced panel data of 14 listed banks which served as population of the study for the period of 2007-2018 using Generalized Least Square (GLS) regression as a tool of analysis. The study found that CEO Pay and Chairman’s compensation have positive effect on the value of listed banks, while the highest paid director exact negative influence on the banks’ value. However, when the variables were moderated with share ownership of executives, CEO pay had positive effect on banks’ value while Chairman’s compensation and Highest Paid director reduces the value of the firm after moderation. Share ownership has positive and significant effect on value of listed banks in Nigeria. This implies that the CEO Pay and Chairman’s compensation improves the value of banks. Therefore, it is recommended among others that the management of banks should increase the CEO pay and place more emphasis on performance as a basis of increased pay to guarantee continuous improvement in the value of the banks.