Analysis of the Relationship between Management Remuneration and Financial Performance of Selected Public Listed Companies in the Nairobi Securities Exchange

Mobegi Fred Morara, Dr. Meshack Misoi and Dr. Jackson Ong’eta Oyaro
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Mobegi Fred Morara: University of Eastern Africa, Baraton, P.O. Box 2500 – 30100, Eldoret, Kenya
Dr. Meshack Misoi: University of Eastern Africa, Baraton, P.O. Box 2500 – 30100, Eldoret, Kenya
Dr. Jackson Ong’eta Oyaro: University of Eastern Africa, Baraton, P.O. Box 2500 – 30100, Eldoret, Kenya

International Journal of Research and Innovation in Social Science, 2021, vol. 05, issue 08, 825-831

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.

Date: 2021
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