DIRECTORS’ COMPENSATION AND PERFORMANCE OF SELECTED QUOTED FIRMS

Otekunrin, A. O. and Nwanji, T. I. and Ajayi, S. A. and Awonusi, Frank and Falaye, Adebanjo Joseph and Eluyela, F. D. (2018) DIRECTORS’ COMPENSATION AND PERFORMANCE OF SELECTED QUOTED FIRMS. Journal of Social Sciences and Public Policy, 10 (2). pp. 38-58. ISSN 2277-0038

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Abstract

This study focused on examining the relationship between directors’ compensation and firm performance using selected general insurance companies as a case study. The main objective was to investigate the relationship that exists between directors’ compensation and firm performance. Eight general insurance companies which were listed in Nigeria Stock Exchange (NSE) were studied. The study covered a five (5) years period of 2009-2013. The time frame used considered the recapitalization in the insurance industry that occurred in 2007. The research made use of secondary data which were collected from the published annual reports of the eight (8) general insurance companies under study. The data was analyzed using the regression analysis. The results from the analysis led to the major findings of the study. Return on Assets (ROA) and net claims paid (NC) were used to establish a relationship between with directors’ compensation. The results show that there is a significant relationship between annual directors’ compensation and firm performance of the general insurance companies under study. The relationship with return on assets showed a significant but negative relationship, while that of net claims paid was significantly positive. The study suggests that efforts to improve the payments of claims should focus on compensation directors satisfactorily. However, proper care should be taken in making such decisions as theshareholders; value may be affected due to the negative relationship between directors’ compensation and return on assets.

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