| dc.description.abstract | At the centre of shareholder wealth maximization has been the need to align the efforts of
management and executives to those of the shareholders. This has led to design of
various executive compensation schemes to reward management and motivate them to
work harder. Over the years there has been need to ascertain the determinants of
executive compensation paid to management and the relationship if any to financial
performance and hence if the conflict of interest is minimized and their interests aligned
then both management and shareholders will benefit from an improved financial
performance of their corporation. The study sought to determine the relationship between
financial performance and executive compensation of commercial banks in Kenya where
it considered a functional form relationship between the financial performance as
measured by return on equity and executive compensation using a regression model
which found a positive but insignificant relationship between financial performance and
executive compensation of commercial banks in Kenya thereby suggesting that
accounting measures of performance like return on equity are not key determinants of
executive compensation for commercial banks in Kenya. This suggests that commercial
banks should incorporate other factors like risk, size of the bank, skill, quality and
experience of the executives to determine their optimal compensation needed to align
their interests to those of shareholders.
Keywords: Executive Compensation, Financial performance, Commercial banks | en_US |
