Effects of Key Management Compensation on Financial Performance of Listed Manufacturing Firms in Kenya

The aim of this study was to investigate the effects of management compensation on financial performance in Kenya using case of listed manufacturing firms. The study employed census method of data collection and secondary data sources over a period of 9 years, 2010-2018, for 15 listed manufacturing firms. The agency theory complemented by the contingency, self-determination, and expectancy theories was used in the study. The data was analyzed using ordinary least squares regression analysis model as well as the descriptive methods. Eviews software was employed in the data manipulation. The key finding of the study was that key management compensation was strongly positively associated (correlated) with the financial performance of listed manufacturing firms in Kenya while Director Emoluments affect financial performance of listed manufacturing firms negatively but not strongly. Another finding was that debt ratio highly negatively and statistically significantly influenced the relation between management compensation and financial performance of listed manufacturing firms in Kenya suggesting that debt is an important factor in determining the relation between management compensation and financial performance of listed manufacturing firms in Kenya. The findings of the study are important in that they can be employed in formulating policy initiatives and strategies for improving financial performance of firms in the country