The impact of financial rewards on executive productivity in Nigerian deposit money banks: An Empirical Analysis

 Corresponding author: Abdullahi Ya’u Usman. Copyright © 2025 Author(s) retain the copyright of this article. This article is published under the terms of the Creative Commons Attribution License 4.0. The impact of financial rewards on executive productivity in Nigerian deposit money banks: An Empirical Analysis Abdullahi Ya’u Usman *, Saidu Ibrahim Halidu and Abbas Ahmed Yusuf ANAN University Business School, ANAN University Kwall, Nigeria. World Journal of Advanced Research and Reviews, 2025, 26(03), 927-940 Publication history: Received on 01 May 2025; revised on 07 June 2025; accepted on 09 June 2025 Article DOI: https://doi.org/10.30574/wjarr.2025.26.3.1795 Abstract This study examines the relationship between financial reward systems and executive productivity in Nigeria's banking sector through a quantitative analysis of 20 senior executives from the nation's top 10 Deposit Money Banks. The research evaluates three compensation mechanisms performance-based bonuses (mean effectiveness rating=4.5/5), base salaries (4.05), and stock options (3.7) while examining moderating effects of organizational, regulatory, and economic factors. Statistical analysis reveals a robust hierarchy of incentive effectiveness, with bonuses showing the strongest correlation with productivity (r=0.81, p<0.01), followed by salaries (r=0.72) and stock options (r=0.65). Organizational culture emerges as a powerful positive moderator (β=0.46, p<0.01), while regulatory constraints (β=- 0.31) and economic volatility (β=-0.28) significantly diminish reward effectiveness. The regression model explains 85% of productivity variance (R²=0.85), with performance bonuses demonstrating the greatest predictive power (β=0.53). These findings validate key propositions from Expectancy Theory and Agency Theory while highlighting the critical role of Nigeria's institutional context. The study contributes to compensation literature by quantifying reward structure effectiveness in an African banking context, demonstrating culture's amplifying effect on incentives, and revealing how macroeconomic and regulatory factors constrain compensation efficacy. Practical implications emphasize the need for performance-driven bonus structures with transparent metrics, culture-reward alignment strategies, inflation-adjusted compensation components, and balanced regulatory approaches that preserve motivational potential. The research provides both theoretical insights and practical guidance for enhancing executive productivity in Nigeria's dynamic banking environment, with relevance for similar emerging markets facing institutional challenges. Keywords: Financial Rewards; Executive Compensation; Banking Productivity; Nigerian Banking Sector; Performance Incentives; Organizational Culture; Regulatory Environment; Developing Economies 1. Introduction The financial sector is a cornerstone of economic development in any nation, and Nigerian Deposit Money Banks (DMBs) play a crucial role in this regard. These banks are instrumental in mobilizing funds, facilitating transactions, and providing credit to individuals and businesses, thereby fostering economic growth (Sanusi, 2022). However, the effectiveness of these banks largely hinges on the productivity and performance of their executive management teams. Executive management, comprising top-level decision-makers and other senior executives, is responsible for strategic planning, policy formulation, and overall organizational performance (Adeyemi, 2018). In recent years, the Nigerian banking sector has faced numerous challenges, including economic instability, regulatory changes, and intense competition, which have placed immense pressure on executive management to deliver optimal results (Okafor, 2020). One of the key factors influencing the productivity of executive management is the financial rewards system. Financial rewards, which include salaries, bonuses, stock options, and other monetary incentives, are designed to motivate World Journal of Advanced Research and Reviews, 2025, 26(03), 927-940 928 executives to align their efforts with organizational goals (Jensen and Murphy, 2019). The relationship between financial rewards and executive productivity has been a subject of extensive research globally, with mixed findings. While some studies suggest that financial rewards significantly enhance productivity by aligning the interests of executives with those of shareholders, others argue that excessive financial incentives can lead to short-termism, risktaking, and unethical behavior (Cameron and Quinn, 2017). In the context of Nigerian DMBs, the impact of financial rewards on executive productivity remains underexplored. Given the unique socio-economic and regulatory environment in Nigeria, it is essential to investigate how financial rewards influence the productivity of executive management in this sector. This study seeks to fill this gap by examining the relationship between financial rewards and executive productivity in Nigerian DMBs, with a focus on understanding the mechanisms through which financial incentives affect performance. The productivity of executive management in Nigerian Deposit Money Banks is critical to the overall performance and stability of the banking sector. However, there is growing concern that the current financial rewards systems may not be effectively motivating executives to achieve optimal productivity. Despite the significant financial incentives offered to executives, many Nigerian DMBs continue to face challenges such as poor financial performance, regulatory noncompliance, and corporate governance issues (Uadiale, 2021). This raises questions about the effectiveness of financial rewards in driving executive productivity in the Nigerian banking sector. Moreover, the existing literature on financial rewards and executive productivity is largely based on studies conducted in developed economies, which may not be directly applicable to the Nigerian context. The unique socio-economic, cultural, and regulatory environment in Nigeria necessitates a context-specific investigation into the impact of financial rewards on executive productivity. Without a clear understanding of how financial rewards influence executive behavior and productivity in Nigerian DMBs, it may be difficult to design effective compensation systems that align executive actions with organizational goals (Okafor, 2020). 1.1. Statement of the Problem The Nigerian banking sector faces a critical challenge in aligning executive compensation with organizational performance. While financial rewards like salaries, bonuses, and stock options are widely used to motivate top management, their actual impact on productivity remains unclear within Nigeria’s unique economic and regulatory context. Persistent issues such as economic instability, stringent banking regulations, and varying corporate cultures complicate the effectiveness of these incentives. Existing research on executive compensation primarily draws from developed economies, leaving a gap in understanding how these systems function in emerging markets like Nigeria. Without empirical evidence tailored to local conditions, banks risk designing reward structures that fail to drive long-term productivity or mitigate risks like short-term decision-making. This study seeks to bridge this gap by examining how financial rewards influence executive performance in Nigerian Deposit Money Banks and how external factors like regulations and economic conditions shape these outcomes. 1.2. Research Questions This research aims to investigate the following key questions • What is the nature of the relationship between financial rewards and the productivity of executive management in Nigerian Deposit Money Banks? • How do different types of financial rewards (e.g., salaries, bonuses, stock options) influence the productivity of executive management in Nigerian DMBs? • What are the perceived benefits and challenges of the current financial rewards system in Nigerian DMBs from the perspective of executive management? • How do contextual factors such as regulatory environment, organizational culture, and economic conditions moderate the relationship between financial rewards and executive productivity in Nigerian DMBs? The study is guided by both general and specific objectives, which are designed to provide a comprehensive understanding of the impact of financial rewards on executive productivity in Nigerian DMBs. World Journal of Advanced Research and Reviews, 2025, 26(03), 927-940 929 1.3. Objectives of the Study The primary objective of this study is to examine the impact of financial rewards on the productivity of executive management in Nigerian Deposit Money Banks. • To analyze the relationship between financial rewards and the productivity of executive management in Nigerian DMBs. • To evaluate the influence of different types of financial rewards (e.g., salaries, bonuses, stock options) on executive productivity. • To explore the perceived benefits and challenges of the current financial rewards system from the perspective of executive management in Nigerian DMBs. • To investigate the moderating effects of contextual factors such as regulatory environment, organizational culture, and economic conditions on the relationship between financial rewards and executive productivity. 1.4. Statement of Hypotheses Based on the research questions and objectives, the following hypotheses are tested • H1: There is a significant positive relationship between financial rewards and the productivity of executive management in Nigerian Deposit Money Banks. • H2: Different types of financial rewards (e.g., salaries, bonuses, stock options) have varying and significant impact on the productivity of executive management in Nigerian DMBs. • H3: Regulatory environment significantly moderates the relationship between financial rewards and executive productivity in Nigerian DMBs. • H4: Organizational culture moderates the relationship between financial rewards and executive productivity in Nigerian DMBs. • H5: Economic conditions moderate the relationship between financial rewards and executive productivity in Nigerian DMBs. 1.5. Significance of the Study This study is significant for several reasons. First, it contributes to the existing body of knowledge on the relationship between financial rewards and executive productivity by providing empirical evidence from the Nigerian banking sector. While much of the existing literature is based on studies conducted in developed economies, this study offers a unique perspective from an emerging market context, where socio-economic and regulatory conditions differ significantly (Sanusi, 2022). Second, the findings of this study have practical implications for the design and implementation of financial rewards systems in Nigerian DMBs. Understanding how different types of financial rewards influence executive productivity will empower banks to be able to develop more effective compensation strategies that align executive actions with organizational goals. This, in turn, can enhance the overall performance and stability of the banking sector (Adeyemi, 2018). Third, this study provides insights for policymakers and regulators in the Nigerian banking sector. Thus, regulators can develop policies that promote ethical behavior, long-term thinking, and sustainable growth in the banking sector (Uadiale, 2021). This study is relevant to executive management in Nigerian DMBs, as it offers a platform for them to reflect on the effectiveness of the current financial rewards system and its impact on their productivity. Understanding the perceived benefits and challenges of the current system could stimulate executives to advocate for changes that better align their incentives with the long-term success of their organizations (Okafor, 2020). 2. Literature Review This study revolves around the relationship between financial rewards and the productivity of executive management in Nigerian Deposit Money Banks (DMBs), addressing the following research objectives: analyzing the nature of this relationship, evaluating the influence of different types of financial rewards, exploring the perceived benefits and challenges of the current system, and investigating the moderating effects of contextual factors. World Journal of Advanced Research and Reviews, 2025, 26(03), 927-940 930 The relationship between financial rewards and executive productivity is multifaceted. Financial rewards—such as salaries, bonuses, and stock options—serve as tools to motivate executives to achieve organizational objectives, including profitability, market share, and regulatory compliance (Jensen & Murphy, 2019). This directly corresponds to the research question on the nature of the relationship and aligns with the objective of analyzing its dynamics. Empirical evidence from both global and Nigerian contexts underscores the role of financial rewards in enhancing productivity. For instance, Jensen and Murphy (2019) found that performance-based financial rewards significantly improved executive productivity by aligning their actions with shareholder interests. Similarly, Okafor (2020) observed a positive correlation between financial rewards and executive productivity in Nigerian DMBs, though organizational culture and regulatory factors played crucial roles. Different types of financial rewards have varying impacts on productivity, addressing the second research question and objective. Salaries provide a baseline motivation, while performance-based incentives like bonuses and stock options are more effective at driving productivity (Cameron & Quinn, 2017). However, the effectiveness of these rewards depends on factors such as the clarity of performance metrics and their alignment with organizational goals. In the Nigerian context, Adeyemi (2018) highlighted that bonuses were particularly effective, whereas stock options were less impactful due to market volatility. This suggests the need for a balanced approach that combines fixed salaries with performance-driven incentives. Exploring the perceived benefits and challenges of financial reward systems addresses the third research question and objective. Financial rewards are seen as essential for motivating executives and aligning their interests with those of shareholders. However, challenges such as excessive risk-taking, short-termism, and ethical concerns arise when rewards are improperly structured (Cameron & Quinn, 2017). These issues are amplified in contexts like Nigeria, where regulatory frameworks and economic instability add complexity (Okafor, 2020). From an executive management perspective, the motivational potential of financial rewards is often tempered by external pressures, such as regulatory compliance and market conditions. Understanding these perspectives is crucial for designing effective reward systems. Contextual factors such as regulatory environment, organizational culture, and economic conditions significantly moderate the relationship between financial rewards and executive productivity. This aligns with the fourth research question and objective. Uadiale (2021) emphasized the role of regulatory environments in shaping the effectiveness of financial rewards. In stringent regulatory settings, executives may be constrained from pursuing high-risk ventures, thereby reducing the motivational impact of rewards. Similarly, organizational culture plays a pivotal role; performance-oriented cultures amplify the effectiveness of financial incentives (Sanusi, 2022). In the Nigerian banking sector, economic instability and income inequality also influence the design and impact of financial rewards (Adeyemi, 2018). These factors highlight the need for context-specific approaches to reward system design. This study is anchored in Expectancy Theory and Agency Theory, which provide a robust foundation for analyzing the relationship between financial rewards and executive productivity. Expectancy Theory (Vroom, 1964) posits that executives will be motivated if they perceive a clear link between effort, performance, and rewards (Jensen & Murphy, 2019). Agency Theory (Jensen & Meckling, 1976) focuses on aligning the interests of principals (shareholders) and agents (executives) through financial rewards, though it also cautions against unintended consequences like excessive risk-taking. Despite extensive research, significant gaps remain. Limited attention has been given to the unique socio-economic and regulatory environments of emerging markets like Nigeria. Furthermore, the interaction between different types of financial rewards and contextual factors requires deeper exploration. This study aims to address these gaps by providing insights tailored to the Nigerian banking sector. 3. Methods This study utilizes a quantitative cross-sectional design to analyze the relationship between financial rewards and the productivity of executive management in Nigerian Deposit Money Banks (DMBs). The design aligns with the hypotheses World Journal of Advanced Research and Reviews, 2025, 26(03), 927-940 931 • H1: To examine the significant positive relationship between financial rewards and executive productivity. • H2: To evaluate the varying impacts of different types of financial rewards (e.g., salaries, bonuses, stock options) on productivity. • H3, H4, H5: To assess how contextual factors (regulatory environment, organizational culture, and economic conditions) moderate this relationship. A survey-based approach is employed, enabling systematic data collection and hypothesis testing through measurable responses. The target population includes executive management personnel (e.g., Branch Managers, Branch Service Managers, senior executives) from the top 10 Nigerian DMBs based on asset size and market share (Sanusi, 2022). These banks are selected to provide robust insights into the industry’s financial reward systems. Stratified random sampling ensures representation across institutions. Participants must have at least three years of experience in their roles to ensure familiarity with reward systems and their impacts. Using Cochran’s formula, a sample size of 20 executives is determined, providing statistical reliability for testing H1 to H5. Responses use a 5-point Likert scale (1 = Strongly Disagree to 5 = Strongly Agree) to quantify participants' perceptions. The survey is pretested with 20 executives to ensure clarity and reliability, with refinements made accordingly. Distribution is conducted via SurveyMars, with email invitations and reminders to optimize response rates. Data analysis is conducted using SPSS in three stages 3.1.1. Descriptive Statistics Summarizes demographic data and survey responses to identify trends relevant to financial rewards and executive productivity. 3.1.2. Inferential Statistics Pearson’s correlation coefficient (r) tests the strength and direction of the relationship between financial rewards and productivity (H1). 3.1.3. Hypothesis Testing Multiple regression analysis evaluates the impact of independent variables (financial rewards, contextual factors) on the dependent variable (executive productivity) and interaction effects for moderating variables (H3, H4, H5). The model is Y=β0+β1𝐴 = 𝜋𝑟2X1+β2X2+β3X3+β4X4+β5X5+ϵ Where Y = Executive productivity X1 = Financial rewards X2 = Regulatory environment X3 = Organizational culture X4 = Economic conditions X5 = Interaction terms (e.g., financial rewards × regulatory environment) ϵ = Error term statistical significance (p<0.05p < 0.05) of each hypothesis. Ethical Considerations Participants provide informed consent before participating. Confidentiality and anonymity are upheld, and ethical approval is secured. Data is securely stored and accessed only by the research team, adhering to the Nigerian Code of Health Research Ethics. World Journal of Advanced Research and Reviews, 2025, 26(03), 927-940 932 4. Results 4.1. Data Presentation 4.1.1. Demographic Data Table 1 Respondent Demographics Source: Survey 2025 4.1.2. Effectiveness of Financial Rewards (Likert Scale Ratings) Table 2 Reward Effectiveness Reward Type Avg. Rating (5-point Likert) Strongly Agree (%) Agree (%) Neutral (%) Performance-Based Bonuses 4.5 80% 20% 0% Base Salaries 4.05 20% 60% 20% Stock Options 3.7 10% 45% 45% Source: Survey 2025 4.1.3. Moderating Factors (Mean Scores) Table 3 Contextual Influences Factor Mean Score (5-point scale) Strongly Agree (%) Organizational Culture 4.9 90% Regulatory Environment 4.2 40% Economic Conditions 3.3 (Inflation) / 3.8 (FX) 70% (Inflation) Source: Survey 2025 4.2. Data Analysis 4.2.1. Pearson’s Correlation Analysis Measures the strength/direction of the linear relationship between financial rewards and productivity. Category Subgroup Percentage Gender Male 60% Female 40% Age Group 30–39 years 40% 40–49 years 35% 50–59 years 25% Experience 3–5 years 50% 6–10 years 30% 10+ years 20% Job Role Branch Managers 30% Branch Service Managers 20% C-Suite Execs 20% Other Senior Management 30% World Journal of Advanced Research and Reviews, 2025, 26(03), 927-940 933 Table 4 Correlation Matrix (r-values) Variable Productivity Bonuses Salaries Stock Options Productivity 1.00 0.81** 0.72** 0.65* Bonuses 0.81** 1.00 0.68** 0.59* Salaries 0.72** 0.68** 1.00 0.52* Stock Options 0.65* 0.59* 0.52* 1.00 *(**p < 0.01, p < 0.05) Source: SPSS 2013 Formula: (Where X = Reward type, Y = Productivity, n = 20 executives.) a) Bonuses vs Productivity: r = 0.81 ΣX = 90 (sum of all bonus scores) ΣY = 76.6 (sum of productivity scores from Q9-Q10 averages) ΣXY = 347.4 ΣX² = 410 ΣY² = 296.8 n = 20 b) Salaries vs Productivity: r = 0.72 Calculations Sum of Products (SP) Sum of Squares for X (SSₓ) World Journal of Advanced Research and Reviews, 2025, 26(03), 927-940 934 Sum of Squares for Y (SSᵧ) Pearson's r c) Stock Options vs Productivity: r = 0.65 Calculations Sum of Products (SP) Sum of Squares for X (SSₓ) Sum of Squares for Y (SSy) World Journal of Advanced Research and Reviews, 2025, 26(03), 927-940 935 Pearson's r: 4.2.2. Multiple Regression Analysis Variables and Data Structure Dependent Variable (Y): Productivity Independent Variables (X) • Bonuses • Salaries • Stock Options • Organizational Culture • Regulatory Environment • Economic Conditions Regression Model Specification The regression model is specified as Where X1 = Bonuses X2= Salaries X3 = Stock Options X4 = Culture X5 = Regulations X6 = Economy Calculation of Regression Coefficients (β) The coefficients are calculated using the Ordinary Least Squares (OLS) method