Journal of Economics and Financial Analysis, 6 (2), pp. 43-67, [2022]
URI: https://ojs.tripaledu.com/jefa/article/view/76/87

Institutional Shareholders' Monitoring Intensity and Executive Remuneration in South Africa


University of KwaZulu-Natal, South Africa


University of KwaZulu-Natal, South Africa


University of KwaZulu-Natal, South Africa


DOI: http://dx.doi.org/10.1991/jefa.v6i2.a54

Abstract

This study investigates the effect of distraction measures as a proxy for the intensity of institutional shareholders' monitoring responsibility regarding corporate executive remuneration in the South African context. We employ the more robust Generalised Method of Moments (GMM) estimation approach to analyse the data from firms listed on the Johannesburg Stock Exchange (JSE) covering the period 2004-2019. The results show that distraction has a significant positive impact on corporate executive remuneration. Hence, when institutional shareholders’ attention shifts due to distraction, monitoring control is relaxed, and corporate executive officers manipulate remuneration to their advantage. The results are useful for investment managers and prospective investors in their efforts to ensure governance mechanisms that enhance corporate value to the benefit of stakeholders.

Keywords

Institutional shareholder; Agency theory; Executive remuneration; Institutional shareholder monitoring intensity; GMM; Corporate Managers.

JEL Classification

G30, G34.

Full Text:

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