Analysis of the Relationship between Management Remuneration and Financial Performance of Selected Public Listed Companies in the Nairobi Securities Exchange
- September 23, 2021
- Posted by: rsispostadmin
- Categories: IJRISS, Management, Social Science
International Journal of Research and Innovation in Social Science (IJRISS) | Volume V, Issue VIII, August 2021 | ISSN 2454–6186
Mobegi Fred Morara; Dr. Meshack Misoi; Dr. Jackson Ong’eta Oyaro
University of Eastern Africa, Baraton, P.O. Box 2500 – 30100, Eldoret, Kenya
Abstract: This study aimed at evaluating the relationship between management remuneration and financial performance of selected listed companies in Nairobi Securities exchange and adopted quantitative research method while utilising secondary data from the companies’ websites and the 2016 – 2018 annual financial reports and stratified and criterion sampling. The study considered salary, benefits, bonus and allowances on remuneration and ROA and ROE for financial performance. Based on analysis using both descriptive and inferential analysis (Spearman correlation analysis) in the Stata statistical software, the study has established that, the financial performance (ROA and ROE) differed from company to company in the three years evaluated, with, average annual ROA and ROE both decreasing from 3.5 and 0.113 to 3.1 and 0.068 respectively. Management remuneration strategies also differed from company to company with salary (all companies) and benefits (83.3%) being the most utilised. Bonus was the only management remuneration strategy that significantly correlated with ROE (r value= 0.4737) and ROA (r value= 0.3941). It is thus recommended that organisation to leverage management remuneration strategies such as salary, benefits and bonus to improve overall financial performance.
Key words: Management remuneration; Financial performance; public listed companies
I.INTRODUCTION
Remuneration refers to the way through which the organization rewards employees for their contribution to the organization and facilitate meeting of organization’s goals (Bach, 2009). Management remuneration encompasses salary, benefits and rewards that the top management employees receive due to the work that they undertake in the organization. It can also include benefits that families of the employees receive from the organization (Jaafar et al., 2012). Grissom and Mitani ( 2016), and Bussin ( 2015) identified that salary is important in employees’ performance.
Financial performance is one of the methods used in measuring organizational performance (Upadhaya et al., 2014) and includes measures such as sales growth, return on assets, return on investment, return on equity, annual income, profitability, market share, share prices among other variables ( Ongore & Kusa, 2013; Smirnova & Zavertiaeva, 2017). Return on asset is significant as it assesses the earning of the company relative to the assets that it owns and the efficiency
