Corporate performance and CEO compensation in China |
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| Institution: | 1. E. J. Ourso College of Business, Louisiana State University, United States;2. Wharton Financial Institutions Center, United States;3. School of Accounting and Finance, The Hong Kong Polytechnic University, Hong Kong;1. Lingnan College, Sun Yat-sen University, Guangzhou, China;2. School of Accounting, Economics and Finance, University of Wollongong, Australia;3. Research School of Finance, Actuarial Studies & Statistics, Australian National University, Australia;4. Department of Applied Finance and Actuarial Studies, Macquarie University, Australia;1. International Business School, Sun Yat-sen University, Zhuhai 519082, China;2. Business School and Center for Accounting, Finance and Institutions, Sun Yat-sen University, Guangzhou 510275, China;3. College of Business Administration, University of Rhode Island, Kingston, RI, 02881, USA;1. Deakin University, 221 Burwood Highway, Burwood, Victoria 3125, Australia;2. RMIT University, 445 Swanston Street, Victoria 3000, Australia |
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| Abstract: | This paper examines the compensation of CEOs in China's listed firms. First, we discuss what is known about the setting of CEO compensation and then we go on to examine factors that may help explain variations in the use of performance related pay. In China, listed firms have a dominant or controlling shareholder and we argue that the distinct types of controlling shareholder have different impacts on the use of incentive pay. We find that firms that have a State agency as the major shareholder do not appear to use performance related pay. In contrast, firms that have private blockholders or SOEs as their major shareholders relate the CEO's pay to increases in stockholders' wealth or increases in profitability. However the pay–performance sensitivities for CEOs are low and this raises questions about the effectiveness of firms' incentive systems. |
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