BUSN20019 Return on Asset and Share Price For Direct Relationship

Answer:

Correlation between Directors’ remuneration and the firm's activities based on Return on Asset and Share Price

Field of research: The decisions taken by directors have a direct impact on companies’ performance in the industry. Many organisations apply the pay-for-performance theory which focus on compensating the directors based on the organizational performance. The executive tend to put extra effort to improve a company’s performance when their remuneration is depend of it. Studies have established a direct relationship between directors’ remuneration and company’s performance. Clearly directors’ remuneration and a company’s performance are dependent of each other. This study seeks to investigate the correlation between Directors’ remuneration and the firm's performance based on Return on Asset and Share Price.

Secondary Data: The secondary data will be obtained from two ASX listed companies, that is, the ANZ Banking Group Limited Company and the Alumina Limited. A two-year 2017 financial and review report of the two companies will be obtained from their official websites, that is, https://www.rns-pdf.londonstockexchange.com/rns/5969V_-2017-11-6.pdf for the ANZ Banking Group’s 2017 financial report and https://www.aluminalimited.com/latest-annual-report/ for Alumina Limited’s 2017 financial and review reports.

RQ (Research Question): The study will investigate the relationship between Directors’ remuneration and companies’ performance based on Return on Asset and Share Price. Specific RQ: How does Directors’ remuneration affect a company’s performance based on Return on Asset and Share Price?

Variables: Firm’s activities and Directors’ remuneration

Search terms: Directors’ benefits and remuneration; Organizational performance; ANZ Group Limited; Alumina Limited; Financial reports; Return on Assets; and Share price.

Merged articles Reference List: The studies by Borlea, Achim, & Mare (2017); Barenbaum, O’Rourke, & Schubert (2017); and Rashid (2018) investigated the relationship between executives’ remuneration and company performance. The four studies established a correlation between the two variables. In a performance-based pay system, the executives are likely to focus on increasing a company’s financial earning to increase their income. The studies were conducted outside Australia and cannot be used as a true representation of the relationship between firms’ performance and directors’ remuneration. However, the studies provide vital literature for the research.

Barenbaum, L., O’Rourke, B., & Schubert , W. (2017). The Impact of Share-Based Compensation. New York: Strategic Finance.

Borlea, S. N., Achim, M. V., & Mare, C. (2017). Board characteristics and firm performances in emerging economies. Lessons from Romania. Journal of Economic Research, Volume 30, Issue 1.

Rashid, A. (2018). Board independence and firm performance: Evidence from Bangladesh. Future Business Journal, Volume 4, Issue 1, June 2018, Pages 34-49.