Corporate Governance and Board Compensation: A Case of listed Non-Financial Firms in Pakistan

Authors

  • Zahid Ali Department of Commerce and Management Sciences, University of Malakand.
  • Shuaib Ali School of Accounting, Zhongnan University of Economics and Law, Wuhan; P.R. China
  • Adnan Khan Department of Commerce and Management Sciences, University of Malakand.

Abstract

The study addresses the impact of corporate governance (CG) on board compensation for the listed non-financial firms on Pakistan Stock Exchange (PSX) for the period 2005-2015. We incorporated female directors, board size, ownership concentration, board independence, and adoption of CCG (code of corporate governance) as channels of CG. Board compensation was measured by the natural log of the total baord compensation. The study has controlled for firm size, firm performance, leverage, and cash flow from operation. By using ordinary least square (OLS) regression analysis technique together with robust standard error, we find significant relationship between CG characteristics and board compensation.

Findings suggest that CG characteristics and ownership structure plays a significant role in the board compensation determination. Board size and board independence exhibits significant positive relationship with board compensation. Additionally, consistent with literature, we find negative relationship between gender diversity and board compensation. Ownership concentration shows positive relationship with board compensation. Implementation of code of CG exhibits positive and significant relationship with board compensation. Finally we find positive relationship between CG index developed via Principal Component Analysis (PCA) and board compensation.

Key Words: Corporate Governance; Board Compensation; Ownership Concentration; Gender Diversity; Corporate Governance Index

Author Biographies

Zahid Ali, Department of Commerce and Management Sciences, University of Malakand.

Lecturer in Management Sciences

Adnan Khan, Department of Commerce and Management Sciences, University of Malakand.

Lecturer in Management Sciences

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Published

01.07.2020