The Impact of CEO Compensation on Firm Performance: The Gender Perspective

Abstract

This study examines the impact of CEO compensation on firm performance from the gender perspective. The impact of CEO power on firm performance is tested by using the performance measures of Return on Equity (ROE) and Return on Assets (ROA). There are two reasons for choosing ROE and ROA as the firm performance measures. The first reason is the availability of the data from the source that has been used in this research. The second reason is because it has been used many times in previous studies. In this way comparing this research to the existing literature will be done in a more efficient way. Two important theories will be discussed: agency theory and shareholders theory. The findings provide evidence identifying CEO compensation as a determinant of firm performance, and suggest more CEO power is more likely to beneficial to firm performance and therefore to shareholders, as opposed to an agency cost. My contribution to this topic will feature the gender lens and examine the impact of male CEO compensation versus that of female CEO compensation on firm performance. The findings do not provide concrete evidence on the influence of male CEO compensation against female CEO compensation on firm performance.