The effect of executive compensation on the financial performance of listed non-financial firms in ghana
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Date
2023
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KNUST
Abstract
This study examines the relationship between executive compensation and the financial performance of non-financial firms listed in Ghana. Using a quantitative research approach and an explanatory research design, the study analyzes secondary panel data from 2005 to 2021 sourced from annual reports and financial statements of 23 selected firms listed on the Ghana Stock Exchange. The findings reveal that higher executive compensation is positively associated with increased market value and profitability, underscoring the importance of appropriately rewarding executives for their contributions to organizational success. However, the study highlights the negative impact of total basic remuneration on both market value and profitability, emphasizing the need for a balanced compensation structure that incorporates performance-based incentives. Additionally, the inclusion of financial benefits in the compensation package shows a modest positive effect on market value, while an excessive focus on cash benefits can hinder profitability. The study also reveals that a higher proportion of variable pay is linked to a decrease in market value but a positive correlation with profitability. Furthermore, firm age is found to have a negative effect on market value, indicating the challenges faced by older firms in adapting to market dynamics, while firm size does not significantly influence market value but may impact profitability due to operational factors. These findings provide valuable insights for researchers and practitioners, contributing to our understanding of the complex relationship between executive compensation and financial performance in the context of non-financial firms in Ghana.
Description
A Thesis Submitted to the Institute of Distance Learning, Kwame Nkrumah University of Science and Technology in Partial Fulfilment of the Requirement for the Degree of master of science in accounting and finance