The relationship between ownership concentration and executive compensation of companies listed at the Nairobi securities exchange
Abstract
The study sought to examine whether there is a relationship between the levels of
executive compensation and ownership concentration for firms listed in the Nairobi
Stock Exchange. Higher ownership concentration has been determined as an
important factor in exerting pressure on many aspects of a firm’s corporate
governance structure, of which executive compensation is part. The influence on
executive compensation should be a push towards the realization of optimal
compensation contracts.
The study uses the aggregate percentage of the top five shareholders in a firm as
proxy for ownership concentration. The study controls for other firm specific
variables that have been determined in prior studies as influencing the levels of
executive compensation i.e. firm size, firm performance (profitability) and growth
opportunities measured as the Market to Book value ratio of a firm.
The study analyzes data for 25 companies in the Nairobi Securities Exchange over the
2007-2011 period. The study finds non-statistically significant relationship between
ownership concentration and executive compensation. In other findings of the study
executive compensation is found to be positively correlated to firm size and
performance as observed in other prior studies. Overall however the study raises
questions about the role of block-holders as monitors of corporate governance.
Citation
MBA ThesisSponsorhip
University of NairobiPublisher
School of Business, University of Nairobi
Description
The relationship between ownership concentration and executive compensation of companies listed at the Nairobi securities exchange