Sensitivity of Corporate Performance and the Executive Directors' Compensation of listed Financial Services Firms
Abstract The study investigates the sensitivity of corporate performance to executive directors' compensation of listed financial services firms in Nigerian stock market, an emerging capital market from 2008 to 2018. Using the entire samples of forty 42 financial service firms, the Generalised Method of Moment (GMM) was the statistical technique deployed to test the stated hypotheses and to achieve stated objectives. The results show that Revenue Per Employee (RPEY) has a positive and sensitive nexus with executive directors' compensation, even though Profit Per Employee (PPEY) has a negative and sensitive association with explained variable, lastly, Tobin Q has a positive and insensitive causality with executive directors' compensation and they are all statistically significant at 5% of level of significance. Our results suggest insight to the responsiveness of performance to executive compensation could be achieve by using non-traditional performance metrics such as responsibility accounting, this gives as a paradigm shift from traditional accounting-based metrics. Keywords: Optimal contracting theory, executive directors, managerial power theory, Responsibility Accounting. JEL Classifications: M12; M14; M21