Impact of CEOs Pay Disparity on Stability of Banks: Evidence from Pakistan

This study is carried out to investigate the nature of association between Banks’ stability and the Chief Executive Officers (CEOs) pay difference as compared to other executives for a sample of 17 Pakistani commercial banks, over the period of 9 years (2005 to 2013). The study finds that as compared to other executives, CEO pay difference has a significant but negative association with stability of banks performance, i.e., higher pay difference between CEO and other executives induced greater risk practices in banks. Hence, banks with lower stability must try to reduce the compensation gap between the CEO and his executive team, so that safe policies could be implemented.