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How does Directors remuneration affect SMEs’ performance?

Afrifa, G.A., Adesina, O. (2018) How does Directors remuneration affect SMEs’ performance? Review of Accounting and Finance, 17 (2). pp. 238-258. ISSN 1475-7702. (doi:10.1108/RAF-12-2016-0199) (KAR id:66536)

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Abstract

The purpose of this paper is to explain empirically the relationship between the remuneration levels of a sample of listed Small and Medium Enterprises (SMEs) directors and firm performance. The paper also investigates whether deviations from the optimal directors’ remuneration level reduce firm performance.

The study uses a panel data regression analysis of 802 AIM-listed SMEs over an eight-year period (2005-2012). Using a non-linear approach, the results show that an optimum director’s remuneration level exist which results from comparing the benefits and costs of director’s remuneration. Hence, the paper does not only show how directors’ remuneration level affects firm performance, it also extends the stream of knowledge by indicating how a deviation from the optimal point influences UK-listed SMEs performance. Moreover, the results show that the effect of directors’ remuneration on firm performance is greater during financial crisis period.

Compared with previous literature on directors’ remuneration, this paper focuses on AIM-listed SMEs and our finding of a concave relationship between directors’ remuneration level and performance of leads us to recommend that firms, especially SMEs should endeavour to determine the optimal level of directors’ remuneration to maximise performance.

Item Type: Article
DOI/Identification number: 10.1108/RAF-12-2016-0199
Uncontrolled keywords: Directors’ remuneration, SMEs, AIM, performance, UK
Subjects: H Social Sciences > H Social Sciences (General)
Divisions: Divisions > Kent Business School - Division > Department of Accounting and Finance
Depositing User: Godfred Afrifa
Date Deposited: 26 Mar 2018 10:22 UTC
Last Modified: 06 Oct 2021 14:25 UTC
Resource URI: https://kar.kent.ac.uk/id/eprint/66536 (The current URI for this page, for reference purposes)
Afrifa, G.A.: https://orcid.org/0000-0003-3670-8812
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