Executive Remuneration Structure and Corporate Firm Value Among 25 Index Listed Firms at the Nairobi Securities Exchange, Kenya
Keywords:
Firm Value, Fixed Remuneration, Short-Term Remuneration, Long-Term Remuneration, Financial LeverageAbstract
Purpose: This study examined the effect of executive remuneration structure on corporate firm value among the 25 Index listed firms at the Nairobi Securities Exchange. The research aimed to determine how fixed remuneration, short-term incentives, and long-term incentives influenced firm value, considering the moderating role of financial leverage.
Methodology: The study adopted a quantitative research design to examine relationships between executive remuneration components and firm value. The target population comprised firms listed under the Nairobi Securities Exchange 25 Share Index over a five-year period from 2018 to 2022. Secondary data were obtained from annual reports and financial statements of the listed companies. Data were analyzed using Econometric Views (EViews) software, applying descriptive statistics, correlation analysis, and panel regression.
Findings: The findings indicated that long-term remuneration components had a positive and statistically significant effect on firm value. Conversely, fixed remuneration, short-term incentives, and other executive perks were not statistically significant in explaining variations in firm value. Financial leverage was found to significantly moderate the relationship between executive remuneration and firm value, with higher leverage increasing firm risk and weakening the positive influence of long-term incentives.
Unique Contribution to Theory, Practice and Policy: The study contributes to corporate governance literature by providing empirical evidence on the effectiveness of executive remuneration structures in enhancing firm value in emerging markets. Practically, it reveals the importance of emphasizing long-term incentive schemes in executive compensation packages. From a policy perspective, the findings offer insights to regulators such as the Capital Markets Authority and corporate remuneration committees.
DOI: https://doi.org/10.5281/zenodo.18999738
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