Publication Type
Working Paper
Publication Date
2009
Abstract
This paper investigates CEO pay and pay-performance relationship in China’s listed firms. We distinguish four firm types based on their controlling owners: state owned enterprises affiliated with state asset management bureaus (SAMBs), state owned enterprises affiliated with the central government (SOECGs), state owned enterprises affiliated with a local government (SOELGs), and private firms controlled by private investors. We also distinguish between firms with foreign investors and those without. Because the different types of controlling owners have different objectives, motivations, and political interests, they affect managers’ compensation in the firms in which they invest. Our results indicate that CEO pay is lowest in SAMB controlled firms and highest in SOECG controlled firms. Not only is CEO pay positively associated with firm performance, the positive pay-performance relationship is stronger in both types of SOE firms but weaker in privately controlled firms. In addition, firms with foreign investors compensate their CEOs more highly than those without foreign investors, an effect that is significant in both SOEs and privately controlled firms. Overall, the evidence suggests that CEO compensation in China is jointly determined by firm performance, market-oriented reform and the unique ownership structure, meaning that standard theories of efficient compensation contracts may not apply in such emerging markets.
Keywords
Managerial compensation, Firm performance, Ownership structure
Discipline
Finance and Financial Management | Portfolio and Security Analysis
Research Areas
Finance
Citation
CAO, Xiaping Jerry; TIAN, GARY; and PAN, XIAOFEI.
State Owned Vs. Privately Owned Firms: Whose CEOs Are Better Compensated?. (2009).
Available at: https://ink.library.smu.edu.sg/lkcsb_research_smu/17
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.