Directors’ Remuneration Disclosure Transparency in Nigeria and the Influence of Block Share Ownership
Keywords:Block share ownership, directors’ remuneration, disclosure, Nigeria, transparency.
This paper examines directors’ remuneration disclosure transparency in an emerging economy (Nigeria). We specifically examine how the block share ownership influences the level of transparency in the disclosure of directors’ remuneration in a sample of companies listed on the Nigerian Stock Exchange in 2012. Using ordinary least squares and binary logistic regressions to examine the relationship, we find that block share ownership is associated with lower transparent disclosure of directors’ remuneration. The result shows a positive relationship between audit quality and transparent disclosure of directors’ remuneration. The study finds that the transparency score is less than 40%. On the whole, we provide evidence that managers in Nigerian Listed Companies are inclined not to make voluntary disclosure of their remuneration to the public. This paper has implication for policy makers and regulatory authorities in Nigeria on the need to embark on remuneration disclosures reforms so as to make directors’ remuneration disclosure mandatory for Nigerian Listed Companies to make it comparable with accepted global good practice. This study contributes to the remuneration disclosure transparency literature by providing support for the expropriation hypothesis in the behaviour of block shareholders from an emerging economy whose market is very much different from those of developed economies.
Adegbite, E. (2012). Corporate governance regulation in Nigeria. Corporate Governance, 12(2), 257–276. doi:10.1108/14720701211214124
Adelopo, I. (2011). Voluntary disclosure practices amongst listed companies in Nigeria. Advances in Accounting, 27(2), 338–345. doi:10.1016/j.adiac.2011.08.009
Akhtaruddin, M., & Haron, H. (2010). Board ownership, audit committees’ effectiveness, and corporate voluntary disclosures. Asian Review of Accounting, 18(3), 245–259. doi:10.1108/13217341011089649
Andjelkovic, A., Boyle, G., & McNoe, W. (2002). Public disclosure of executive compensation: Do shareholders need to know? Pacific-Basin Finance Journal, 10(1), 97–117. doi:10.1016/S0927-538X(01)00034-8
Babío Arcay, M. R., & Muiño Vázquez, M. F. (2005). Corporate Characteristics, Governance Rules and the Extent of Voluntary Disclosure in Spain. Advances in Accounting, 21(05), 299–331. doi:10.1016/S0882-6110(05)21013-1
Barako, D., Hancock, P., & Izan, H. (2006). Factors influencing voluntary corporate disclosure by Kenyan companies. Corporate Governance: An International Review, 14(2), 107–125.
Barontini, R., & Bozzi, S. (2011). Board compensation and ownership structure: Empirical evidence for Italian listed companies. Journal of Management and Governance, 15(1), 59–89. doi:10.1007/s10997-009-9118-5
Bebchuk, L. A., & Fried, J. M. (2003). Executive Compensation as an Agency Problem. Journal of Economic Perspectives, 17(3), 71–92. doi:10.1257/089533003769204362
Becker, B., Cronqvist, H., & Fahlenbrach, R. (2011). Estimating the Effects of Large Shareholders Using a Geographic Instrument. Journal of Financial and Quantitative Analysis, 46(04), 907–942. doi:10.1017/S0022109011000159
Ben-Amar, W., & Zeghal, D. (2011). Board of directors’ independence and executive compensation disclosure transparency: Canadian evidence. Journal of Applied Accounting Research, 12(1), 43–60. doi:10.1108/09675421111130603
Cadbury Committee. (1992). Report of the Committee on the Financial Aspects of Corporate Governance. Gee, London, UK.
Colpan, A. M., & Yoshikawa, T. (2012). Performance Sensitivity of Executive Pay: The Role of Foreign Investors and Affiliated Directors in Japan. Corporate Governance: An International Review, 20(6), 547–561. doi:10.1111/j.1467-8683.2012.00923.x
Core, J. E., Guay, W., & Larcker, D. F. (2003). Executive Equity Compensation and Incentives : A Survey. FRBNY Economic Policy Review, 9(1), 1–25.
Core, J. E., Guay, W., & Larcker, D. F. (2008). The power of the pen and executive compensation. Journal of Financial Economics, 88(1), 1–25. doi:10.1016/j.jfineco.2007.05.001
Core, J., Guay, W. R., & Thomas, R. S. (2005). Is U.S. CEO compensation inefficient pay without performance? Michigan Law Review, 103, 1142–1185.
Correa, R., & Lel, U. (2014). Say on Pay Laws, Executive Compensation, CEO Pay Slice, and Firm Value around the World. doi:10.2139/ssrn.2274823
Coulton, J., James, C., & Taylor, S. (2001). The effect of compensation design and corporate governance on the transparency of CEO compensation disclosures. UTS School of Accounting Working Paper, (45). doi:10.2139/ssrn.273628
Council, A. C. G. (2014). Corporate Governance Principles and Recommendations. Australian Corporate Governance Code, 3rd Edition.
Cremers, M. K. J., & Grinstein, Y. (2014). Does the market for CEO talent explain controversial CEO pay practices? Review of Finance, 18(3), 921–960. doi:10.1093/rof/rft024
Ehikioya, B. I. (2009). Corporate governance structure and firm performance in developing economies: evidence from Nigeria. Corporate Governance, 9(3), 231–243. doi:10.1108/14720700910964307
Eng, L. L., & Mak, Y. T. (2003). Corporate governance and voluntary disclosure. Journal of Accounting and Public Policy, 22(4), 325–345. doi:10.1016/S0278-4254(03)00037-1
Fama, E., & Jensen, M. (1983). Separation of ownership and control. Journal of Law and Economics, 26(2), 301–325.
Ferrarini, G., Moloney, N., & Vespro, C. (2003). Executive Remuneration in the EU : Comparative Law and Practice Executive Remuneration in the EU : Comparative Law and Practice, (June).
Gul, F. A., & Leung, S. (2004). Board leadership, outside directors’ expertise and voluntary corporate disclosures. Journal of Accounting and Public Policy, 23(5), 351–379. doi:10.1016/j.jaccpubpol.2004.07.001
Guthrie, K., & Sokolowsky, J. (2010). Large shareholders and the pressure to manage earnings. Journal of Corporate Finance, 16(3), 302–319. doi:10.1016/j.jcorpfin.2010.01.004
Haniffa, R. M., & Cooke, T. E. (2002). Culture, Corporate Governance and Disclosure in Malaysian Corporations. Abacus, 38(3), 317–349. doi:10.1111/1467-6281.00112
Healy, P. M., & Palepu, K. G. (2001). Information asymmetry, corporate disclosure, and the capital markets: A review of the empirical disclosure literature. Journal of Accounting and Economics, 31(1-3), 405–440. doi:10.1016/S0165-4101(01)00018-0
Hope, O. K. (2013). Large shareholders and accounting research. China Journal of Accounting Research, 6(1), 3–20. doi:10.1016/j.cjar.2012.12.002
Hossain, M., & Hammami, H. (2009). Voluntary disclosure in the annual reports of an emerging country: The case of Qatar. Advances in Accounting, 25(2), 255–265. doi:10.1016/j.adiac.2009.08.002
Jensen, M., & Meckling, W. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3, 305–360.
Jensen, M., & Murphy, K. (1990). Performance pay and top-management incentives. Journal of Political Economy, 98(2), 225–264.
Kaplan, S. N. (2012). Excutive Compensation and Corporate Governance in the U.S.: Perceptions, facts and Challenges (No. Working Paper 18395). Cambridge.
La Porta, R., Lopez-de-Silanes, F., & Shleifer, A. (1999). Corporate ownership around the world. The Journal of Finance, 54(2), 471 – 517. Retrieved from http://onlinelibrary.wiley.com/doi/10.1111/0022-1082.00115/full
Muslu, V. (2010). Executive directors, pay disclosures, and incentive compensation in large European companies. Journal of Accounting, Auditing & Finance, 25, 569–605. doi:10.1177/0148558X1002500406
Okike, E. N. M. (2007). Corporate Governance in Nigeria: the status quo. Corporate Governance: An International Review, 15(2), 173–193. doi:10.1111/j.1467-8683.2007.00553.x
Renders, A., & Gaeremynck, A. (2012). Corporate governance, principal-principal agency conflicts, and firm value in european listed companies. Corporate Governance: An International Review, 20(2), 125–143. doi:10.1111/j.1467-8683.2011.00900.x
ROSC. (2008). Report on the Observance of Standards and Codes ( ROSC ): Corporate governance country assessment Nigeria.
ROSC. (2011). Report on the Observance of Standards and Codes ( ROSC ) Nigeria: Accounting and Auditing.
Samaha, K., Dahawy, K., Hussainey, K., & Stapleton, P. (2012). The extent of corporate governance disclosure and its determinants in a developing market: The case of Egypt. Advances in Accounting, 28(1), 168–178. doi:10.1016/j.adiac.2011.12.001
Sanda, A. U., Garba, T., & Mikailu, A. S. (2011). Board Independence and Firm Financial Performance : Evidence from Nigeria. African Economic Research Consortium, (January), 41.
Shin, T. (2013). Fair Pay or Power Play?: Pay Equity, Managerial Power, and Compensation Adjustments for CEOs. Journal of Management, XX(published before print), 1–30. doi:10.1177/0149206313478186
Straka, P. J. (1993). Executive Compensation Disclosure : The SEC ’ s Attempt to Facilitate Market Forces. Nebraska Law Review, 72(3), 803–836.
U.S. Securities and Exchange Commission. (2006). Executive Compensation and Related Person Disclosure (RIN 3235-AI80). SEC Final Rules, (33), 1–436.
Vafeas, N., & Afxentiou, Z. (1998). The association between the SEC’s 1992 compensation disclosure rule and executive compensation policy changes. Journal of Accounting and Public Policy, 17(1), 27–54. doi:10.1016/S0278-4254(97)10006-0
Yermack, D. (1998). Companies‘ Modest Claims About the Value of CEO Stock Option Awards. Review of Quantitative Finance and Accounting, 10(2), 207–226.
Young, M. N., Peng, M. W., Ahlstrom, D., Bruton, G. D., & Jiang, Y. (2008). Corporate governance in emerging economies: A review of the principal-principal perspective: Review paper. Journal of Management Studies, 45(1), 196–220. doi:10.1111/j.1467-6486.2007.00752.x
Authors who publish with this journal agree to the following terms:
- Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution License that allows others to share the work with an acknowledgement of the work's authorship and initial publication in this journal.
- Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the journal's published version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgement of its initial publication in this journal.
- Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) prior to and during the submission process, as it can lead to productive exchanges, as well as earlier and greater citation of published work (See The Effect of Open Access).