How does Directors remuneration affect SMEs’ performance?

Journal article


Afrifa, G. and Adesina, S. 2018. How does Directors remuneration affect SMEs’ performance? Review of Accounting and Finance. 17 (2), pp. 238-258. https://doi.org/10.1108/RAF-12-2016-0199
AuthorsAfrifa, G. and Adesina, S.
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.

KeywordsDirectors’ remuneration, SMEs, AIM, performance, UK
Year2018
JournalReview of Accounting and Finance
Journal citation17 (2), pp. 238-258
Digital Object Identifier (DOI)https://doi.org/10.1108/RAF-12-2016-0199
Publication dates
Print2018
Publication process dates
Deposited09 Nov 2017
Accepted28 Oct 2017
Accepted author manuscript
Output statusPublished
Permalink -

https://repository.canterbury.ac.uk/item/8862x/how-does-directors-remuneration-affect-smes-performance

  • 12
    total views
  • 1
    total downloads
  • 0
    views this month
  • 0
    downloads this month

Export as

Related outputs

Abnormal inventory and performance in manufacturing companies – evidence from trade credit channels
Afrifa, G., Alshehabi, A., Tingbani, I. and Halabi, H. 2020. Abnormal inventory and performance in manufacturing companies – evidence from trade credit channels. Review of Quantitative Finance and Accounting . https://doi.org/10.1007/s11156-020-00903-y
Managing group work: impact of peer assessment on students' engagement
Adesina, S. and Adesina, F. 2018. Managing group work: impact of peer assessment on students' engagement.
Working capital management, cash flow and SMEs’ performance
Afrifa, G. and Tingbani, I. 2018. Working capital management, cash flow and SMEs’ performance. International Journal of Banking, Accounting and Finance. 9 (1). https://doi.org/10.1504/IJBAAF.2018.10010466
Working capital management and performance of listed SMEs
Afrifa, G., Tauringana, V. and Tingbani, I. 2015. Working capital management and performance of listed SMEs. Journal of Small Business & Entrepreneurship . https://doi.org/10.1080/08276331.2015.1114351
A quantitative model for environmentally sustainable supply chain performance measurement
Acquaye, A., Ibn-Mohammed, T., Genovese, A., Afrifa, G., Yamoah, F. and Oppon, E. 2017. A quantitative model for environmentally sustainable supply chain performance measurement. European Journal of Operational Research. https://doi.org/10.1016/j.ejor.2017.10.057
How does directors' remuneration affect SMEs’ performance?
Adesina, S. and Afrifa, G. 2017. How does directors' remuneration affect SMEs’ performance?
Net working capital, cash flow and performance of UK SMEs
Afrifa, G. 2016. Net working capital, cash flow and performance of UK SMEs. Review of Accounting and Finance. 15 (1), pp. 21-44. https://doi.org/10.1108/RAF-02-2015-0031
Net trade credit: what are the determinants?
Afrifa, G. and Gyapong, E. 2017. Net trade credit: what are the determinants? International Journal of Managerial Finance. https://doi.org/10.1108/IJMF-12-2015-0222
HRM, employee identity and environmental sustainability
Okonkwo, O. and Adesina, S. 2016. HRM, employee identity and environmental sustainability.
Corporate governance and performance of UK listed small and medium enterprises
Afrifa, G. and Tauringana, V. 2015. Corporate governance and performance of UK listed small and medium enterprises. Corporate Governance. 15 (5). https://doi.org/10.1108/CG-03-2015-0029
Working capital level influence on SME profitability
Afrifa, G. and Padachi, K. 2016. Working capital level influence on SME profitability. Journal of Small Business and Enterprise Development. 23 (1), pp. 44-63. https://doi.org/10.1108/JSBED-01-2014-0014
Working capital management practices and profitability of AIM listed SMEs
Afrifa, G. 2015. Working capital management practices and profitability of AIM listed SMEs. Journal of Enterprising Culture. 23 (1), pp. 1-23. https://doi.org/10.1142/S0218495815500016
Working capital management practices of UK SMEs: the role of education and experience
Afrifa, G. 2013. Working capital management practices of UK SMEs: the role of education and experience. International Journal of Academic Research in Accounting, Finance and Management Sciences. 3 (4), pp. 185-196.
WCM component importance ranking order by SMEs: financial directors perspective
Afrifa, G. 2014. WCM component importance ranking order by SMEs: financial directors perspective. International Journal of Current Research. 6 (1), pp. 631-4639.
UK university sustainability agenda: underlying motivations
Adesina, S. and Shevchenko, K. 2013. UK university sustainability agenda: underlying motivations.
The impact of epistemic communities on governmental accounting change: a case of New Zealand central government
Adesina, S. and Mellett, H. 2013. The impact of epistemic communities on governmental accounting change: a case of New Zealand central government.
The relative importance of working capital management and its components to SMEs profitability
Tauringana, V. and Afrifa, G. 2013. The relative importance of working capital management and its components to SMEs profitability. Journal of Small Business and Enterprise Development. 20 (3). https://doi.org/10.1108/JSBED-12-2011-0029
The impact of change agents on the adoption of accrual accounting in government: a two-country comparison
Adesina, S. 2009. The impact of change agents on the adoption of accrual accounting in government: a two-country comparison.