Abstract
The intention of the study is to test the pay-performance relation for the Jordanian manufacturing firms listed on the Amman Stock Exchange during the period 2000-2011. Using two regression methods; the Ordinary Least Square Method, and the Fixed Effect Method, three models were tested. All three models that have been tested concluded a positive and significant impact of the CEO remuneration on the Jordanian manufacturing firms’ performance. Another finding of the study, that is, due to specific-characteristics of each of the companies, the impact of the remuneration varies among the Jordanian Industrial Firms in the magnitude of the impact, and consistent in the direction of the impact. These findings are compatible with the say that the CEO remuneration have a significant role in mitigating the agency problem by granted reasons for CEOs perform their tasks to the magnification of owner’s wealth, and that the remuneration should reflect and suit firm’s performance. Also these results support the view that connecting the wealth of CEO to the performance of the firm can bring into line the interests of owners and those of CEO, and thus, helps improving the firm’s performance.
Highlights
In this study we examined the relationship between CEO (Chief Executive Officer) remuneration and the corporation performance in Jordan, and up to the knowledge of the researcher, this is the first study of its type in Jordan with that goal
One example is the work of Girma et al (2007), which studied the effect of Cadbary reforms in the field of the CEO remuneration in UK companies, and concluded that the relationship between CEO compensation and the corporation performance was weak in terms of statistical significance
The findings of testing the pay-performance relation for the Jordanian industrial companies are reported in the following part
Summary
In this study we examined the relationship between CEO (Chief Executive Officer) remuneration and the corporation performance in Jordan, and up to the knowledge of the researcher, this is the first study of its type in Jordan with that goal. One example is the work of Girma et al (2007), which studied the effect of Cadbary reforms in the field of the CEO remuneration in UK companies, and concluded that the relationship between CEO compensation and the corporation performance was weak in terms of statistical significance. In the other hand, Sigler (2011) found a proportional relationship with a statistical significance between the sum of CEO compensations and the performance of the American industrial companies after the adoption of Sarbanes Oxley Act One example is the work of Girma et al (2007), which studied the effect of Cadbary reforms in the field of the CEO remuneration in UK companies, and concluded that the relationship between CEO compensation and the corporation performance was weak in terms of statistical significance. Gregg et al (2005) concluded the same weak relationship in their study. Ozkan (2007) used the sum of the CEO compensations in the major British companies during the fiscal year 2003 - 2004 concluded that there is no significant relationship between the CEO compensations and the performance of the UK corporations.
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