The Relationship among Directors' Pay, Corporate Governance, and Firm Performance: Evidence from Financial Sector of Pakistan

Abstract

This research empirically examines the effect of firms' performance and corporate governance attributes on directors' pay. To attain the objective, the data for the period from 2007 to 2014 are retrieved from annual reports of 52 listed financial firms. Return on assets and return on equity are utilized to measure performance. Board size, board independence, board ownership and CEO duality are employed as corporate governance practices. Using the random effect model, the performance has positively related to directors’ pay, but level of significance is sensitive across performance proxies. The board independence has negatively significantly influenced the directors' pay. However, board ownership significantly positively influenced the directors’ pay. Furthermore, board size and CEO duality both have not significantly associated with directors’ pay.