THE IMPACT OF EXECUTIVE COMPENSATION PACKAGES ON THE FINANCIAL PERFORMANCE OF DEPOSIT MONEY BANKS IN NIGERIA

Abstract

This study examines the relationship between executive compensation packages and the financial performance of deposit money banks in Nigeria. The study uses data from five randomly selected deposit money banks over a five-year period from 2015 to 2019, and analyzes it using correlation and regression models. Compensation packages are proxied by cash, bonus, stock, and perquisites of office, while return on liquid asset proxies the dependent variable. The study finds that compensation packages for executive directors are significantly related to the financial performance of deposit money banks. Specifically, return on liquid assets is positively related to various proxies of executive compensation, except for cash compensation, which was not found to have a significant positive relationship. This study contributes to the expanding literature on executive compensation and provides insights into the development of uniform compensation packages for deposit money banks in Nigeria. The study recommends that a uniform compensation structure should be put in place by the regulatory authority, which will integrate the interests of executive directors, promote good corporate governance, and motivate bank executives to strive for higher financial performance.