"The influence of CEO compensation on firm performance and its relation to economic growth

Abstract

"This paper examines the link between CEO compensation and firm performance and its relation to economic growth on the non-financial EuroNext 100 firms from the period 2009-2016. This study uses two different models to estimate the relationship, namely fixed effects panel-data and Arellano-Bond linear dynamic panel-data where firm performance is lagged (t-1). Moreover, the compensation is divided into cash compensation and equity-based compensation and firm performance is measured using accounting-based measures (ROE & ROA) and a market-based measure (Tobin’s Q). The empirical results show that there is a significant positive relationship between cash compensation and the accounting-based measures for both models. Furthermore, CEO compensation and firm performance are also significantly positively related to economic growth based on the accounting-based measures for both models."