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Directors' Remuneration and Performance in Australian Banking
Author(s) -
Doucouliagos Hristos,
Haman Janto,
Askary Saeed
Publication year - 2007
Publication title -
corporate governance: an international review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.866
H-Index - 85
eISSN - 1467-8683
pISSN - 0964-8410
DOI - 10.1111/j.1467-8683.2007.00651.x
Subject(s) - remuneration , accounting , earnings , business , earnings per share , demographic economics , actuarial science , finance , economics
This paper explores the relationship between directors' pay and performance within Australian banking, using panel data for the 1992–2005 period. The relationship between CEO pay and performance is investigated also. Several earnings models are estimated, using different dependent variables, alternate measures of performance and different estimation techniques. The results indicate an absence of a contemporaneous relationship between directors' pay and bank performance, and no association with prior year performance. However, there is a more distant pay‐performance relationship, with total directors' pay having a robust positive association with earnings per share lagged two years, as well as with ROE lagged two years. The other key determinants of directors' pay in Australian banking are bank specific managerial policies, lags in the administration of pay, bank size, directors' age and directors' stock ownership. In contrast to total directors' pay, the evidence confirms a strong positive and direct association between CEO remuneration and prior year bank performance. The pay‐performance association is stronger and more direct for CEO remuneration than it is for total directors' remuneration. The responsiveness of CEO pay with respect to bank performance appears to have increased over time.