Executive remuneration and firm financial performance: lessons from listed companies in Australia and implications for their APEC counterparts

ABSTRACT

This paper attempts to understand whether there is alignment between executive remuneration and shareholder interests in publicly listed companies in Australia. The issue is analysed over three distinct stages of an economic cycle, and the panel fixed effects method is used to estimate the performance-remuneration models. The study finds that the long-term compoents of the remuneration package would highly incentivize CEOs and executive directors. Still, the fixed salary component exerts no such enticement for them to maximize shareholders’ wealth. This new information could be useful for Australian firms as well as for firms in Asia Pacific countries due to the close relationship they share with the Australian firms.

KEYWORDS:

• Company performance
• executive remuneration
• Australian Securities Exchange
• APAC
• fixed effects
• financial performance

Acknowledgements

The authors thank the Guest Editors, two anonymous reviewers for their constructive feedback that resulted in a much improved version of this paper.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Additional information

Notes on contributors

Albert Wijeweera

Albert Wijeweera is associate professor of economics at Khalifa University, Abu Dhabi. He also currently maintains an adjunct position as associate professor at Southern Cross University, Australia. His research interests include financial econometrics, applied econometrics and international finance.

Peter Rampling

Peter Rampling is higher degree research supervisor in the School of Business at Excelsia College, Sydney, Australia. His research interests include corporate governance, director and board performance metrics, and corporate accounting and financial reporting.

Ian Eddie

Ian Eddie is a professor and the Chair of the School of Business at Excelsia College, Sydney, Australia. Prior to commencing at Excelsia College Professor Eddie was the VinaCapital Professor of Private Equity at RMIT International University Vietnam. His main research interests are in the fields of corporate governance, financial technology and innovation; financial analytics; venture capital and private equity finance; organizational leadership; and financial reporting.