Controlling shareholders’ tunneling and executive compensation: Evidence from China

Wang, Kun; Xing, Xin‐Hui

doi:10.1016/j.jaccpubpol.2010.09.014

Cited by 172 publications

(101 citation statements)

References 23 publications

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“…Jian and Wang (2010) find that controlling shareholders prop up their listed firms through abnormal related sales and then tunnel back through related lending. Wang and Xiao (2011) find that controlling shareholders that engage in tunnelling activities have less incentive to demand high pay-for-performance sensitivity in executive compensation.…”

Section: Type II Agency Problem and Evidence From Propping And Tunnelmentioning

confidence: 85%

Structural Changes in the Chinese Stock Market: A Review of Empirical Research

2014

China Account Financ Rev

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China’s stock market has gone through major structural changes since its inception in the early 1990s. In this survey article, we review the empirical literature published in 15 leading accounting and finance journals from 1998 to 2013 that documents these important structural changes. In analysing this literature, we focus on the ‘distinctiveness’ of the Chinese stock market compared with developed stock markets (e.g. US) and the research opportunities generated by the China setting. Key themes include China’s share issue privatisation (SIP) reforms, the political connections in privately owned companies, the characteristics of Chinese listed companies and their governance, the regulatory environment reforms in China, and the evolving role played by auditors and other information intermediaries.

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Section: Type II Agency Problem and Evidence From Propping And Tunnelmentioning

confidence: 85%

Structural Changes in the Chinese Stock Market: A Review of Empirical Research

2014

China Account Financ Rev

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“…Goergen and Renneboog (2011) and Bussin (2015) argue that accounting-based performance measurements measure past performance and are subject to manipulation and thus might not be appropriate in determining executive past performance as rent-seeking CEOs are prone to manipulating the accounting measurements in order to achieve higher bonuses, evidenced by accounting scandals at Enron and Worldcom. According to Goergen and Renneboog (2011) and Wang and Xiao (2011), the most common accounting measures used to assess company performance are revenue, operating income or profit and earnings per share (EPS). However, based on literature reviewed, there appears to be no consensus on measuring company performance as various authors have used various measures of absolute financial performance to assess company performance in the pay to performance studies.…”

Section: Literature Review Chief Executive Officer and Chief Financiamentioning

confidence: 99%

Chief Executive Officer and Chief Financial Officer compensation relationship to company performance in state-owned entities

Bussin

Ncube

2017

SAJEMS

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Background: Optimal contracting continues to dominate boardroom and dinner discussions worldwide in light of the 2008 global financial crisis and especially in South Africa, due to the growing income gap. Increased scrutiny is being placed on South African state-owned entities (SOEs), as a result of the seemingly poor performance of SOEs. Some of the SOEs are reported to have received financial bailouts from taxpayers’ money, while executives are raking in millions of rands in remuneration, provoking some concerns on the alignment of executive pay to company performance in SOEs.Aim: The study will assist remuneration committees and policymakers in the structuring of executive pay in SOEs to ensure alignment to company performance.Setting: The study sought to assess, based on empirical evidence, if there is a positive relationship between Chief Executive Officer (CEO) and Chief Financial Officer (CFO) remuneration and company performance in South African SOEs in the period between 2010 and 2014. All 21 Schedule 2 SOEs were included in the study.Methods: The research was a quantitative archival research methodology. Correlation and multiple regression analysis were the main statistical techniques used in this study.Results: Contrary to popular media, a positive relationship between CEO and CFO remuneration (fixed pay and short-term incentives) and company performance in SOEs was observed. Company size appears to be the key determiner of fixed pay in SOEs. The positive relationship was mainly noted on absolute profitability measurements like EBITDA (earnings before interest and tax and depreciation and amortisation) and net profit.Conclusion: SOE remuneration committees and policymakers should maintain the positive relationship; however, more emphasis should be placed on financial efficiency measurements so as to enhance efficiencies in SOEs.

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“…Kali and Sarkar (2011) have found that the main motive behind firm diversification in an emerging economy is for tunneling purposes. Similarly, Wang and Xiao (2011) documented that controlling shareholders cannot enforce the pay-performance compensation scheme if they involved in tunneling activities.…”

Section: Related Party Transactionsmentioning

confidence: 99%

Related Party Transactions and Earnings Management

Kamardin¹,

Latif²,

Maigoshi³

2016

European Proceedings of Social &Amp; Behavioural Sciences

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This study reviewed some studies conducted on related party transactions and earnings management. Based on agency theory, agency conflict motivates managers to engage in self-enrichment transactions at the expense of the owners of the firm. Management or concentrated ownership is proposed to deal with this type of agency problem. However, this form of ownership structure came with its problem that give rise to type II agency conflict between controlling owners and minority shareholders. Controlling shareholders use their controlling power to benefit from the insider information and engage in prejudicial related party transactions at the expense of minority shareholders. This paper identified how and why managers or controlling shareholders use related party transaction as a convenient means to perpetrate accrual-based or real activity earnings management. It was recommended that empirical study be conducted to investigate whether disclosure regulation can constrain real-activity management through related party transaction.

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Controlling shareholders’ tunneling and executive compensation: Evidence from China

Cited by 172 publications

References 23 publications

Structural Changes in the Chinese Stock Market: A Review of Empirical Research

Structural Changes in the Chinese Stock Market: A Review of Empirical Research

Chief Executive Officer and Chief Financial Officer compensation relationship to company performance in state-owned entities

Related Party Transactions and Earnings Management

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