Jordanian Evidence for the Pay-Performance Relation

The intention of the study is to test the pay-performance relation for the Jordanian manufacturing firms listed on the Amman Stock Exchange during the period 2000-2011. Using two regression methods; the Ordinary Least Square Method, and the Fixed Effect Method, three models were tested. All three models that have been tested concluded a positive and significant impact of the CEO remuneration on the Jordanian manufacturing firms’ performance. Another finding of the study, that is, due to specific-characteristics of each of the companies, the impact of the remuneration varies among the Jordanian Industrial Firms in the magnitude of the impact, and consistent in the direction of the impact. These findings are compatible with the say that the CEO remuneration have a significant role in mitigating the agency problem by granted reasons for CEOs perform their tasks to the magnification of owner’s wealth, and that the remuneration should reflect and suit firm’s performance. Also these results support the view that connecting the wealth of CEO to the performance of the firm can bring into line the interests of owners and those of CEO, and thus, helps improving the firm’s performance.