Title: Do family firms pay more to their CEOs?

Authors: Anam Tasawar; Mian Sajid Nazir; Farooq Anwar

Addresses: Department of Management Sciences, COMSATS University Islamabad, Lahore Campus, Pakistan; Department of Commerce, University of Gujrat, Pakistan ' Department of Management Sciences, COMSATS University Islamabad, Lahore Campus, Pakistan ' Lahore Business School, University of Lahore, Pakistan

Abstract: The present study sheds light on the potential dominance of family ownership and its control on CEO compensation in Pakistani family and non-family firms by using data of 132 firms during 2009 to 2015. This study contributes toward new milestone in prior research regarding to developing eastern economies with family dominance in businesses, with respect to impact of family control on CEO compensation. The literature in corporate finance points out that the family firms scrub the level of compensation, which reveals that larger family shareholders play active monitoring role as well as regulate the pay structures of top management. The current study establishes a support for alignment hypothesis of agency theory and does not support the corroboration of managerial rent extracting behaviour in family firms. Moreover, the financial institutions have positive effect on CEO compensation; however, the role of institutions in deciding CEO perks becomes negative in case of family firms as compared to non-family firms.

Keywords: CEO compensation; family ownership; firm performance; board independence; institutional ownership.

DOI: 10.1504/MEJM.2019.102821

Middle East Journal of Management, 2019 Vol.6 No.6, pp.657 - 670

Available online: 13 Aug 2019 *

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