Is Additional CEO Remuneration a Performance Driver? DAX CEOs Evidence

Magali Costa, Inês Lisboa () and René Marzinzik
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Magali Costa: CARME—Centre of Applied Research in Management and Economics, School of Management and Technology, Polytechnic of Leiria, 2411-901 Leiria, Portugal
Inês Lisboa: CARME—Centre of Applied Research in Management and Economics, School of Management and Technology, Polytechnic of Leiria, 2411-901 Leiria, Portugal
René Marzinzik: School of Management and Technology, Polytechnic of Leiria, 2411-901 Leiria, Portugal

Risks, 2023, vol. 11, issue 7, 1-15

Abstract: This study aims to understand the impact of the additional remuneration of the Chief Executive Officer (CEO) over the mean remuneration of the board of directors on firms’ financial performance. The objective is to understand if the highest compensation of the CEO is a firm performance driver. In addition to the impact of total remuneration, the different remuneration components were split and analyzed. An unbalanced panel data of listed companies in DAX–Germany over the period from 2006 until 2019 is analyzed. Using dynamic methodology to estimate the models, the results show that higher additional remuneration positively explains higher firm performance measured using both accounting and market measures. The impact is also evident when additional remuneration components are analyzed. These results support the tournament theory, since when CEOs feel rewarded, they are more efficient in increasing the firm’s performance. Moreover, the firms’ financial characteristics, as well as macroeconomic factors, are also relevant to explaining its performance.

Keywords: CEO remuneration; additional remuneration; remuneration gap; firm performance; Germany (search for similar items in EconPapers)
JEL-codes: C G0 G1 G2 G3 K2 M2 M4 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:gam:jrisks:v:11:y:2023:i:7:p:133-:d:1195882

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