Determinants of CEO pay: empirical evidence from Nigerian quoted banks

Abstract

One of the most important internal corporate governance mechanisms is CEO pay. However, studies on corporate governance from Nigeria have largely ignored this important subject, and where it has been examined, the issue of dynamic endogeneity has been completely ignored thereby leading to lack of credible results explaining the determinants of CEO pay in Nigerian banking industry. This study therefore examined the determinants of CEO pay of quoted banks in Nigeria between 2005 and 2012, using a dynamic panel generalised method of moments (GMM). The results showed that previous CEOs' pay, bank size and CEOs' tenure exerted significant positive influence on CEOs' pay while bank performance, board composition and Tobin's Q had significant but negative effect on CEOs' pay. Board size, CEOs' age and leverage were found to exert no significant impact on CEOs' pay in Nigerian banks. The study therefore concludes that there is a conflict of interests between executives and shareholders, which the CEO's pay has aggravated. Hence, there is a need for the regulatory authorities to formulate appropriate and workable policies that will guide executive remuneration in the Nigerian banking industry.