The study examines whether higher CEO compensation is related to unobserved future firm performance in an emerging market, Pakistan. Further, it extends its scope to analyzing the impact of group affiliation and ownership concentration on the relationship between CEO compensation and future firm performance. The study uses an unbalanced panel data consisting of 1508 firm-year observations from 225 non-financial listed companies in Pakistan Stock Exchange (PSX) for period 2005 to 2012. The multiple regression models adjusted to heteroskedasticity and autocorrelation in error terms are used. The study finds that, in general, CEO compensation is positively associated with future operating performance. However, higher CEO compensation leads to lower operating performance in firms that have lower ownership concentration and are affiliated with business groups. When firms are not affiliated with any group and have high ownership concentration, the relationship between excessive CEO compensation and future operating performance becomes insignificant. Given that efficient compensation packages may lead to long term value creation to shareholders and reduce agency problems, this study highlights an important moderating role of ownership concentration and group affiliation of the firms in emerging markets.

Abstract
1. Introduction
    1.1. Institutional Context of Pakistan
2. Literature Review
3. Data and Methodology
    3.1. Measurement of Key Variables
    3.2. Model
4. Results
5. Conclusion
References

• Muhammad Fayyaz SHEIKH(Lyallpur Business School, G.C. University)
• Aamir Inam BHUTTA(Lyallpur Business School, G.C. University) Corresponding Author.
• Jahanzaib SULTAN(Lyallpur Business School, G.C. University)