Relationship between CEO Compensation and Performance: An Empirical Investigation of Insurance Companies of Pakistan
The study aims to investigate the relationship between CEO compensation and performance of insurance
companies listed on Pakistan Stock Exchange, Pakistan during 2007-2016. Data used in this study were collected from the
annual reports published by the insurance companies during the study period. Pooled ordinary least square (OLS) method was
used to see the impact of explanatory variables (Growth, ROA, solvency ratio, claims ratio, expense ratio and MBR) on CEO
compensation. Findings suggest that somehow their exists a relationship between CEO compensation and performance of
insurance companies of Pakistan. As one of the performance measure Market-to-book ratio is significantly and inversely
related to CEO compensation, suggesting companies with potential growth and with lower market-to-book ratio pay more to
the CEO’s. Moreover CEO compensation has a positive relationship with Size of the firm, solvency ratio and expense ratio.
Index Terms - CEO compensation, Claim ratio, Expense ratio, Firm performance, Solvency ratio.