An empirical analysis of the relationship between CEO compensation and non-performing loans (NPLs) in commercial banks of Bangladesh

Abstract

In this paper, the relationship between CEO pay and NPLs in some commercial banks in Bangladesh will be studied. In addition to that, personal experience during the Internship at ONE Bank PLC will also be described. It is concluded that there is no strong correlation between CEO pay and NPL ratio. There are some contradictions found in this context, because in many cases, the NPL ratio goes up with the increase in salaries whereas in other cases, NPL ratio falls even if there was insignificant CEO pay. Therefore, it can be assumed that CEO pay does not necessarily affect the NPL ratio. There are also other things such as proper corporate governance, proper credit risk management, and internal control mechanisms that play a major role in deciding the NPL ratio. This paper has also explained about the operation mechanism of ONE Bank PLC in detail.