We take a state-stewardship view on corporate governance and executive compensation in economies with strong political involvement, where state-appointed managers act as responsible ‘stewards’ rather than ‘agents’ of the state. We test this view on China and find that Chinese managers are remunerated not for maximizing equity value but for increasing the value of state-owned assets. Managerial compensation depends on political connections and prestige, and on the firms’ contribution to political goals. These effects were attenuated since the market-oriented governance reform. In a social welfare perspective, such compensation stimulates not the maximization of shareholder value but the preservation of the state’s interests.
State-stewardship view, agency theory, executive compensation, political connections
Asian Studies | Corporate Finance | Human Resources Management
Political economy of Chinese finance
J. Jay Choi; Michael R. Powers; Xiaotian Tina Zhang
City or Country
Hao LIANG; RENNEBOOG, Luc; and SUN, Sunny Li.
A state-stewardship view on executive compensation. (2015). Political economy of Chinese finance. 39-91. Research Collection Lee Kong Chian School Of Business.
Available at: http://ink.library.smu.edu.sg/lkcsb_research/5006
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