Ahmad Marei

The high pays received by executives has gained global attention. This study examines the impact of executive compensation on the performance of Jordanian banks, an area that has not been explored much. The study uses empirical methods for data collection and analysis. Dependent variables include Return on Equity (ROE) and Tobin’s Q performance, while total compensation incentives is the main independent variable. Control variables include bank size, bank age, leverage, and female executives. Through balanced panel data analysis comprising 196 bank-year observations, this quantitative research paper applies Ordinary Least Squares (OLS), fixed-effect, and Generalized Method of Moment (GMM) methods. These methods accurately establish the compensation-performance relationship in the banking sector from 2009 to 2022. The coefficient of determination (R2) for the ROE model: 51.63%, Tobin-Q model: 39.33%. These robust models support the main finding that executive compensation is significantly and positively correlated with operating and market-based performance indicators. Results validate the agency hypothesis, indicating that executives are rewarded for bank performance indicators. Consequently, a one-unit increase in executive compensation leads to a rise of 22.8 cents in ROE and 29.51 cents in Tobin-Q. Additionally, bank size, age, leverage, and female executives positively impact bank performance indicators. A modification of BSIZE, BAGE, LEV, and FEMALE by one-unit results in a proportional adjustment of 26.1 cents, 16.6 cents, 2.07 cents, and 48.6 cents, respectively, in ROE. Additionally, a one-unit alteration in BSIZE, BAGE, LEV, and FEMALE corresponds to variations of 77.6 cents, 56.42 cents, 34.39 cents, and 48.8 cents, in Tobin-Q, all in the same direction.

Board diversity is crucial for corporate governance and improves corporate outcomes by aligning management with stakeholders’ interests. Compared to advanced environments, Jordan’s decent sociocultural backdrop exhibits a higher level of gender bias. This study investigates the influence of board gender diversity (BGD) on Jordanian banking sector performance, an under-explored area. This quantitative paper employs Ordinary Least Squares (OLS), random, and fixed-effect approaches to analyze 182 bank-year observations for balanced longitudinal data analysis. These approaches correctly establish the BGD-Tobin’s Q nexus during 2010–2022. The coefficient of determination was 70.57%. The model confirms a positive correlation between BGD and market-based performance indicators. Findings support agency and resource dependency hypotheses, showing BGD’s role in decision-making. Hence, a one-unit increase in BGD causes a 37.2-cent increase in Tobin’s Q measure. Moreover, a one-unit change in board independence, board meetings, size, women’s representation in top management, and capital adequacy ratio, assuming all other factors remain constant, results in Tobin-Q changes of 2.57 cents, 32.8 cents, 5.78 cents, 51.2 cents, 30.55 cents, and 22.86 cents, respectively, and the same direction. The results show how BGD enhances bank performance and contributes to relevant theories. The results are vigorous in a variety of identification and estimation methodologies.