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Corporate Governance Disclosure Index–Executive Pay Nexus: The Moderating Effect of Governance Mechanisms

Mohamed Elmagrhi Orcid Logo, Collins G. Ntim, Yan Wang, Hussein A. Abdou, Alaa M. Zalata

European Management Review, Volume: 17, Issue: 1, Pages: 121 - 152

Swansea University Author: Mohamed Elmagrhi Orcid Logo

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DOI (Published version): 10.1111/emre.12329

Abstract

This paper first employs principal component analysis technique to develop and introduce an alternative UK corporate governance disclosure index to the US-centric ones. Second, we then investigate whether this new corporate governance disclosure index can determine the level of executive pay (includ...

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Published in: European Management Review
ISSN: 1740-4754 1740-4762
Published: Wiley 2020
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URI: https://cronfa.swan.ac.uk/Record/cronfa53167
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last_indexed 2020-07-28T13:15:01Z
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spelling 2020-07-28T12:30:09.2282517 v2 53167 2020-01-09 Corporate Governance Disclosure Index–Executive Pay Nexus: The Moderating Effect of Governance Mechanisms 4def956b7e2d996ad0bfbfcb710b7ef6 0000-0003-3803-8496 Mohamed Elmagrhi Mohamed Elmagrhi true false 2020-01-09 BAF This paper first employs principal component analysis technique to develop and introduce an alternative UK corporate governance disclosure index to the US-centric ones. Second, we then investigate whether this new corporate governance disclosure index can determine the level of executive pay (including CEOs, CFOs, and all executive directors) in UK listed firms, and consequently ascertain whether the governance mechanisms can moderate the pay-for-performance sensitivity. Employing data on corporate governance, executive pay and performance from 2008 to 2013, we find that, on average, better-governed firms, tend to pay their executives lower compared with their poorly-governed counterparts. Additionally, our findings suggest that the pay-for-performance sensitivity is generally positive, but improves in firms with high corporate governance quality, implying that the pay-for-performance sensitivity is contingent on the quality of internal governance structures. We interpret our findings within the predictions of optimal contracting theory and managerial power hypothesis. Journal Article European Management Review 17 1 121 152 Wiley 1740-4754 1740-4762 corporate governance disclosure index; corporate performance; executive pay; endogeneity; principal component analysis, UK combined code 1 3 2020 2020-03-01 10.1111/emre.12329 http://dx.doi.org/10.1111/emre.12329 COLLEGE NANME Accounting and Finance COLLEGE CODE BAF Swansea University 2020-07-28T12:30:09.2282517 2020-01-09T14:33:18.1593316 Mohamed Elmagrhi 0000-0003-3803-8496 1 Collins G. Ntim 2 Yan Wang 3 Hussein A. Abdou 4 Alaa M. Zalata 5 53167__16308__7d2fb7a007514f13945a87fe8b0a55fd.pdf EMRJ_Full_Manuscript_Final_Version_July_2018-1.pdf 2020-01-15T12:37:05.7293610 Output 1123868 application/pdf Accepted Manuscript true 2020-10-14T00:00:00.0000000 true eng
title Corporate Governance Disclosure Index–Executive Pay Nexus: The Moderating Effect of Governance Mechanisms
spellingShingle Corporate Governance Disclosure Index–Executive Pay Nexus: The Moderating Effect of Governance Mechanisms
Mohamed Elmagrhi
title_short Corporate Governance Disclosure Index–Executive Pay Nexus: The Moderating Effect of Governance Mechanisms
title_full Corporate Governance Disclosure Index–Executive Pay Nexus: The Moderating Effect of Governance Mechanisms
title_fullStr Corporate Governance Disclosure Index–Executive Pay Nexus: The Moderating Effect of Governance Mechanisms
title_full_unstemmed Corporate Governance Disclosure Index–Executive Pay Nexus: The Moderating Effect of Governance Mechanisms
title_sort Corporate Governance Disclosure Index–Executive Pay Nexus: The Moderating Effect of Governance Mechanisms
author_id_str_mv 4def956b7e2d996ad0bfbfcb710b7ef6
author_id_fullname_str_mv 4def956b7e2d996ad0bfbfcb710b7ef6_***_Mohamed Elmagrhi
author Mohamed Elmagrhi
author2 Mohamed Elmagrhi
Collins G. Ntim
Yan Wang
Hussein A. Abdou
Alaa M. Zalata
format Journal article
container_title European Management Review
container_volume 17
container_issue 1
container_start_page 121
publishDate 2020
institution Swansea University
issn 1740-4754
1740-4762
doi_str_mv 10.1111/emre.12329
publisher Wiley
url http://dx.doi.org/10.1111/emre.12329
document_store_str 1
active_str 0
description This paper first employs principal component analysis technique to develop and introduce an alternative UK corporate governance disclosure index to the US-centric ones. Second, we then investigate whether this new corporate governance disclosure index can determine the level of executive pay (including CEOs, CFOs, and all executive directors) in UK listed firms, and consequently ascertain whether the governance mechanisms can moderate the pay-for-performance sensitivity. Employing data on corporate governance, executive pay and performance from 2008 to 2013, we find that, on average, better-governed firms, tend to pay their executives lower compared with their poorly-governed counterparts. Additionally, our findings suggest that the pay-for-performance sensitivity is generally positive, but improves in firms with high corporate governance quality, implying that the pay-for-performance sensitivity is contingent on the quality of internal governance structures. We interpret our findings within the predictions of optimal contracting theory and managerial power hypothesis.
published_date 2020-03-01T04:06:01Z
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score 11.017797

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