The Effect of Religious and Ethnic Values on Executive Compensation in Jordanian Firms

Abstract

This study examines the impact of religious and ethnic values on executive compensation in Jordanian firms from 2016 to 2022, using regression analysis with Diff-GMM and Sys-GMM estimation methods to examine compensation dynamics and their alignment with values. The Sys-GMM model shows a robust positive relationship between lagged and current executive compensation. With respect to Islamic values, both methods show a significant decrease in executive compensation in firms that adhere to Islamic principles. In addition, Christian and Catholic affiliation show a significant relationship with executive compensation. Ethical values also consistently show a significant negative relationship with executive compensation. However, control variables, including company size, CEO age, education, experience, and tenure, also play a critical role in shaping executive compensation. Companies need to place these findings in the context of broader corporate dynamics and examine potential interactions with other factors that influence compensation decisions. This study contributes to the understanding of the complicated relationship between religious and ethnic values and executive compensation in Jordanian companies. The findings have important governance and practice implications for companies seeking to align their compensation practices with their values in order to promote ethical accountability, social responsibility, and fairness in the business landscape.