Remuneration Committee and Profitability: Evidence from Nigeria

There is a low profit reported by quoted firms in Nigeria. In a recent study, return on asset, which is a measure of profitability was reported to be as low as 2%. In addition, most of the empirical evidences supporting this nexus are coming from developed economies. This situation is not sustainable and survivable in the case of emerging markets. There is urgent need to call for investigations into possible solutions. In this paper, the focus is on the role of board of directors’ remuneration committee in creating the atmosphere in which board members would feel well remunerated or motivated to work towards improving profitability. This study used ordinary least square regression to test the relationship between the remuneration committee and firm profitability, after controlling for regression diagnostics (normality and homoscedasticity of residual, multicollinearity, model specification, panel tests). The data was based on 112 companies trading on the floor of the Nigerian Exchange Group over ten years (2012-2021). Descriptive statistics, correlation and regression analysis are used to analyse the data. The findings indicate a significantly positive relationship between the remuneration committee and profitability. It is concluded therefore that remuneration committee is a major determinant of profitability among firms quoted in Nigeria. As with all empirical studies, however, this study is subject to several limitations. First of all, the choice of the country is open to criticism, as other countries within the continent are equally available. Second, the results may have been affected by the methods, data, model, and variables. Third, relying on the adapted model may not be free of errors. Finally, using broader set of variables that can act as proxies could be considered as possible, and therefore the study is limited to the independent variables used in this paper.