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CEO remuneration and Firm Performance: an analysis of the FTSE100

Lommers, F.M. (2019) CEO remuneration and Firm Performance: an analysis of the FTSE100.

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Abstract:This study looked into the relationship between the performance of a firm and its policy regarding CEO remuneration. There are two main conflicting theories that have been used. The Agency Theory states that objectives of executives should be aligned with that of the owners of a firm and that the directors are in place to make sure of this. The managerial power theory however states that directors are not able to fulfill this because of the power by executives. This research was done on the basis of both the Return On Assets (ROA) and Return on shares (RET) as proxies for firm performance. For the former, ROA, the regression results came back significant and positive; a relationship was found. For the latter, RET, a positive coefficient was found, but this variable was not significant in the regression. The results of the study thus suggest that there is a positive relationship between firm performance and executive remuneration, following the Agency Theory when looking at ROA as a proxy for firm performance. This can however not be concluded on the basis of shareholder return.
Item Type:Essay (Bachelor)
Faculty:BMS: Behavioural, Management and Social Sciences
Subject:83 economics, 85 business administration, organizational science
Programme:International Business Administration BSc (50952)
Link to this item:http://purl.utwente.nl/essays/78539
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