Managerial power theory, tournament theory, and executive pay in China

By Jing Chen, M. Ezzamel, Ziming Cai. 2011

208 citations recorded by the source corpus.

In this paper, we test two models of executive pay that have not received much attention in research on Chinese listed companies: managerial power theory and tournament theory. We find that structural power (executive share ownership) and prestige power (executive education) are significantly positively related to executive remuneration, and political power (Executive/Party Secretary duality) positively and weakly related to executive remuneration. We also find that executive directors' organization level (as reflected in executive pay level for each of the three highest paid executives) is positively related to executive remuneration and the relationship is convex, and negatively related to the interaction between executive directors' organization level and government ownership. Tournament prize (executive pay) is not related to the number of contestants in the tournament and is negatively related to the interaction term between number of contestants and government ownership. Finally, earnings per share (EPS) as a measure of firm performance is positively related to the pay gap between contestants and negatively related to the interaction term between pay gap and government ownership. We explore the implications of these findings for reforming corporate governance in China.

Subfields: Accounting, Strategy and Management

View Paper: https://www.semanticscholar.org/paper/37d9a326e79f34094ca1d17aaf62f180477eadad

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Citations in the corpus

Corporate Governance in China: A Meta‐Analysis (2018, background): “…outside directors, separating the positions of board chair and chief executive officer (CEO), and providing executive compensation packages that include contingent forms of pay – underpinned by what are generally viewed as ‘good’ or standard corporate governance principles (Chen et al., 2011b).”
Tournament Incentives and Corporate Fraud (2015, background): “We also follow prior literature and 15 See Appendix 1 for a complete description of and the formula for our option intensity measure. compare fraud firms against a sample of non-fraud firms matched by size, industry, and year (e.g., Erickson, Hanlon, and Maydew, 2006).”