CEO pay ratio versus financial performance in Polish public companies

Authors

DOI:

https://doi.org/10.18559/ebr.2024.3.1480

Keywords:

executive compensation, financial performance, corporate governance, pay disparities

Abstract

In this paper, we aim to investigate the relationship between CEO pay ratio and corporate financial performance in Polish public companies. Using a sample of 259 companies listed on the Warsaw Stock Exchange, we demonstrate that links between the pay gap and accounting measures of performance differ from market ones. Our findings indicate a negative correlation between CEO pay ratio and return on sales. This implies that companies pay executives less during periods of high profitability, possibly to avoid the negative impact of excessive pay on firm performance. We also discover that the pay gap, measured by CEO pay ratio, is positively linked with Tobin’s Q and annual stock returns. A high CEO pay ratio signals strong incentives for top executives to perform, potentially leading to better strategic decisions and, consequently, higher Tobin’s Q ratios and annual stock returns.

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Published

2024-09-26 — Updated on 2024-09-30

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Issue

Vol. 10 No. 3 (2024)

Section

Research article- regular issue

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Copyright (c) 2024 Katarzyna Byrka-Kita, Karol Bulasiński

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This work is licensed under a Creative Commons Attribution 4.0 International License.

How to Cite

Byrka-Kita, K., & Bulasiński, K. (2024). CEO pay ratio versus financial performance in Polish public companies. Economics and Business Review, 10(3), 197-215. https://doi.org/10.18559/ebr.2024.3.1480 (Original work published 2024)

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