Abstract:

The study empirically examined the impact of pay disparity on Nigeria's financial service efficiency. The study selected a sample of 40 financial services on the Nigerian stock market. The study adopted an ex-post-facto research design. Data was collected using secondary sources from the firms’ annual reports to determine the influence pay disparity has on Nigeria's financial service efficiency for nine years (2012-2020). Financial service efficiency was ascertained using the Data Envelopment Analysis (DEA) Also, the study utilised the panel Tobit regression to test the hypotheses and found the significant influence between the variables. Consequently, findings from the study show a significant and positive influence pay disparity has on financial service efficiency. The result reflects a widened pay disparity between directors and other workers is an efficiency-enhancing strategy in this sector. The study, therefore, concludes that pay disparity improved the efficiency amongst the financial services firms in Nigeria. Based on the findings the study recommends that a well-structured pay system that focuses on improving directors’ share of remuneration should be considered by financial firms. This structure should be well communicated within the organizations in terms of why they are set up and what they intend to achieve. This will drive home a system of competition in the organization and help to improve efficiency. Furthermore, insurance firms will have to consider a possible merger to help economies of scale and managerial efficiency.