| dc.description.abstract | The study sought to examine the relationship between executive compensation and firm
performance. The study considered functional form relationship between the level of
executive remuneration and accounting performance measures by using a regression model
that related pay and performance.
From the findings, the existence of the pay-performance puzzle was evident, more so, with
regard to smaller banks. The study negates the role of performance in determining
executive compensation, given the inverse and non-significant relationship between pay
and performance among large banks. The study concludes that among the large Kenyan
banks accounting measures of performance are not key considerations in determining
executive compensation and that size is a key criteria in determining executive
compensation as it was significantly but negatively related to compensation. The negative
correlation suggests the capping of executive compensation to ensure maximization of
returns to shareholders. As such, the interests of the executive directors are subordinated to
those of the shareholders in keeping with the agency theory. | en |
