THE IMPACT OF INTERNAL GOVERNANCE MECHANISMS ON CEO COMPENSATION: MENA BANKS CASE
Our research studies the impact of specific bank governance mechanisms on the compensation of CEOs in the framework of banks in the MENA region. We explored what mechanisms of the board of directors can influence the CEO's compensation. Governance mechanisms used are: The size of the board of directors, the independence of the members, the presence of a remuneration committee, the number of board meetings, Duality. Our empirical estimate was based on a sample of 52 banks in the MENA region from 2016-2020. We have developed a regression by taking remuneration as endogenous variables and governance mechanisms as exogenous variables. The results showed that specific mechanisms of the board of directors, such as the presence of a remuneration committee and the frequency of directors' meetings, have no impact on the remuneration of the CEO. On the other hand, we found that the size of the board of directors of banks, the presence of independent directors, and the duality of functions have a positive and significant impact on the compensation of CEOs of banks in the MENA region. Our results are similar to our robustness check test. And we elaborated on an endogeneity issue to test the instrumental variable committee compensation with the CEO compensation as an endogenous variable and found a significant and positive relationship.
governance mechanisms, CEO compensation, duality, banks, board of directors