Top executive pay and firm performance in China

Abstract

The sensitivity of executive pay to share price performance has been the main focus of Western executive pay studies, reflecting shareholders’ efforts to reduce agency problems by better aligning the rewards of executives with their own. However, these studies have ignored motivational effects and possible two-way pay–performance causation. This paper reports Chinese executive pay–performance sensitivity, with international comparisons, to examine whether China's unique institutional environment has produced outcomes consistent with those for Western market economies. This same unique environment makes possible the first estimates of two-way causation based on panel data analysis. The results show that executive pay and firm performance mutually affect each other through both reward and motivation. Journal of International Business Studies (2008) 39, 833–850. doi:10.1057/palgrave.jibs.8400386

Executive pay and performance: the moderating effect of CEO power and governance structure

“…For instance, using a sample of 2,104 Chinese firms from 2000 to 2010, Conyon and He (2012) report positive and higher PPS than those reported for UK and US companies. Their results are also generally consistent with those of previous and recent Chinese studies by Firth et al (2006Firth et al ( , 2007, Kato et al (2006), Buck et al (2008), Conyon andHe (2011) andDing et al (2015), as well as those conducted in the emerging markets of Bulgaria, India, and Taiwan by Jones and Kato (1996), Kumar and Kaura (2002), and Cho et al (2014), respectively. Therefore, given that the international evidence is broadly consistent with the predictions of the MPH, our first hypothesis is that:…”

“…While these statistically significant differences (p-value <.01) are not substantially large compared to those reported by other studies (Buck et al, 2008;Conyon & He, 2011), it at least suggests that allowing for the existence of joint interactions among TPAY, CPAY, TSR, CEO power and CG mechanisms results in an improvement in the PPS. Also, and on comparative basis, it is apparent from Table 8 (9) that the increase in the PPS is higher for CPAY than for TPAY.…”

Empirical Research on Corporate Governance in China: A Review and New Directions for the Future

“…Similar to the perceptions about the boards of directors, most people perceive the supervisory boards to be ineffective in corporate governance because of the strong influence of controlling shareholders (Dahya, Karbhari, Xiao, & Yang, 2003;Shan, 2013;Xiao et al, 2004). Empirical evidence is consistent with this perception, showing that supervisory boards are not significantly associated with executive compensation Conyon & He, 2012), firm performance (Buck et al, 2008;Gang, 2007;Hu et al, 2010), expropriation (Shan, 2013), or firm decisions such as auditor switching and corporate social responsibility (Jia & Zhang, 2011;Lin & Liu, 2009). Thus, like the boards of directors, the supervisory boards have not yet become an effective internal corporate governance mechanism.…”

Social network contingency, symbolic management, and boundary stretching

“…However, the typical CEO pay is very low in China, 1 which makes it difficult to attract skilled and talented CEOs (Buck, Liu, and Skovoroda, 2008). CEO pay in China used to be calculated based on seniority and civil service, and the norms were to pay nearly equal amounts to managers and workers.…”