Paper Contents
Abstract
Executive compensation remains one of the most contentious issues in corporate governance, particularly in the financial services sector where misaligned incentives have historically triggered systemic risks. While an extensive body of research has explored the payperformance nexus in developed economies, evidence from African markets remains limited. This study examines the relationship between executive compensation structures and bank performance in Nigeria, an emerging economy with a highly dynamic and restructured banking sector. Using panel data covering 12 deposit money banks listed on the Nigerian Exchange between 1996 and 2022, we assess the effects of fixed salaries, bonus pay, and deferred compensation on three key measures of performance: return on assets, return on equity return on equity, and Tobins Q. Regression analyses with panel techniques and firm-level controls (bank size, leverage, board size) reveal that overall executive compensation exerts a significant negative effect on return on assets, a significant positive effect on return on equity, but an insignificant effect on Tobins Q. Further disaggregation shows that deferred compensation reduces return on assets while exerting no significant effect on return on equity or Tobins Q, and that bonus are not significantly related to any of the performance measures. These findings underscore the weak pay-for-performance sensitivity of Nigerian banks and highlight the governance risks associated with misaligned incentive systems. Recommendations are drawn for boards, regulators, and investors, emphasizing the need for compensation frameworks that balance short-term performance with long-term value creation.
Copyright
Copyright © 2025 Ogiemwonyi Edomwonyi. This is an open access article distributed under the Creative Commons Attribution License.
