Impact of the Management Structure and Compensation on Financial Performance of Kazakhstani Companies

Abstract

The purpose of the research is to study examines the effects of top management compensation, management diversity and government ownership on financial performance among Kazakhstani listed firms. Drawing on a sample of 156 firm year observations, the study employs the generalized method of momentum (GMM) to examine the relationship. The study contributes to existing literature, aiming at corporate governance practices by aligning top management compensation with performance of listed firms in Kazakhstan, as well as examining the effects of management diversity and government ownership. The study also has practical implications in terms of reconsideration of top management remuneration policies by creating stronger tie of executive compensation and performance-based measures. In addition, the study highlights that increasing management diversity could enchase firm performance in context of Kazakhstan. At the end, the study could be of interest to policymakers and academia through stimulation of compensation disclosure requirements for firms, thereby increasing the transparency of corporate governance practices. The findings reveal positive but not statistically significant relationship among compensation and accounting-based measures of performance i.e. return on assets (ROA) and return on equity (ROE). However, presence of foreign national in management has significant positive impact on firm performance as measured by ROA. On the other hand, government ownership has insignificant negative impact on firm performance. The study also employed firm level and country level control variables and found mixed results. The findings reveal significant negative effects of firm size, inflation, and leverage on ROA, while positive effect of gross domestic product (GDP) on firm performance.

JEL Classification: M1, M14, G3, L25