Macroeconomic determinants of CEO compensation: The moderating role of firm size in South African banks

This study investigates the relationship between macroeconomic price variables and CEO compensation within the South African banking sector, with firm size as the moderating factor. In the past, determinants at the firm and macroeconomic levels have been studied independently; this research integrates these perspectives to explain executive pay dynamics. Using panel data from six JSE-listed commercial banks during 2010–2024, the study employs a fixed-effects regression model and Driscoll–Kraay robust standard errors to correct for heterogeneity, cross-sectional dependence, and heteroscedasticity. CEO compensation is measured by both fixed salary and total compensation. The study's findings indicate that company size moderates the effect of macroeconomic variables on CEO compensation. Larger banks tend to pay CEOs more due to interest-rate and exchange-rate fluctuations. Findings also indicate that company size, as measured by total assets, reduces the effects of both interest rates and exchange rates on CEO fixed and total compensation. The study's evidence adds to the existing literature on CEO compensation by showing that company-specific determinants interact with macroeconomic variables to shape CEO compensation. The study findings provide valuable insights for corporate governance, remuneration committees, and policymaking in emerging markets when structuring CEO compensation.