Agency Compensation and Value of Quoted Consumer Goods Manufacturing Firms: A Multi-Dimensional Study from Nigeria.
Vol.6 Issue 2
This study investigated the relationship between agency compensation and value of quoted consumer goods manufacturing firms in Nigeria. Panel data were sourced from the fact sheets of The Nigeria Stock Exchange from 2009 to 2018. Firm values were proxied by market value and net book value while agency compensation were proxied by executive salaries, executive equity incentives, executive bonus, ownership concentration.two (multiple) regression models were formulated to ascertain the relationship between the variables; in addition, panel Unit root test was utilised to establish the stationarity of the data, prior to the use of panel cointegration, and granger causality test to test long-run and causal relationships respectively. The panel unit root test proved presence of unit root at first difference and concluded that the variables were integrated in the order of 1(I). The study found that executive equity incentives have negative insignificant relationship with market value of the selected firms. It was also observed that the endogenous variables have long-run relationship with the exogenous variables. More so, some causal relationships such as uni-directional flow from net book value to monitoring cost, employee effort to market value.From the findings, the study concluded that there is a significant short-run relationship between the endogenous variables and the exogenous variable. It is therefore recommended that executive salaries of quoted consumer goods manufacturing firms should be pegged constantly in a flexible manner. Board should focus on efficiency measures in setting executive compensation levels as this will affect value of consumer goods manufacturing firms in Nigeria and regulators and policy makers should provide adequate regulation on the determination of remuneration of the directors.
