Product market competition and CEO pay among Nigerian listed non-financial firms
by Olufemi Bodunde Obembe; Damilola Olajide; Clement Olalekan Olaniyi
International Journal of Business Competition and Growth (IJBCG), Vol. 5, No. 4, 2016

Abstract: The role of product market competition in shaping corporate executive contracts has been well debated in the literature. While there is an overwhelming evidence of a positive impact of competition on executive contracts, its empirical verification however remains largely limited to developed countries. This issue is taken up in Nigeria by investigating 63 listed non-financial firms over a period of 13 years. Product market competition was measured by inverse of price-cost margin while a system generalised methods of moments (SGMM) was adopted in the analysis of the data. Our model enables us to control for (dynamic) endogeneity which was raised as an issue in a previous study. Executive pay was measured as the salary of the highest paid director and total directors pay divided by the number of directors. Our results show that product market competition had a positive but not significant impact on executive contracts in Nigeria. Hence, the notion that competition played a positive and significant role in shaping executive contracts may not hold water. We may not be sure whether our result was due to the fact that it was carried out in a developing country with poor institutions or whether previous studies from developed markets did not utilise appropriate estimation technique such as GMM in treating dynamic endogeneity that is present in executive pay.

Online publication date: Sun, 12-Feb-2017

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