Government controlling ownership and CEO compensation incentives: evidence from China

Hui, Zhiyang; Fang, Hongyan

doi:10.1080/00036846.2022.2115973

Cited by 3 publications

(1 citation statement)

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“…Moreover, the correlation between pay-performance sensitivity and company performance is even stronger for state-owned enterprises than for non-state-owned enterprises. In fact, the effect of executive pay incentives on improving company performance is at least as significant as that of non-state-owned enterprises [41]. The Chinese government's "Guiding Opinions" introduce salary control measures that limit incentives and align management's interests with those of shareholders.…”

Section: Plos Onementioning

confidence: 99%

Executive compensation controls and corporate cash holdings

Wang,

Zhang,

Wang

et al. 2023

PLoS ONE

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As a crucial component of internal corporate governance, remuneration controls possess the potential to influence the cash holdings of firms. However, identifying the causal relationship between these controls and such holdings presents a considerable challenge. To address this research gap, this paper leverages the implementation of China’s Guidance on Further Regulating the Remuneration Management of Heads of Central Enterprises as a quasi-natural experiment to investigate the relationship between executive remuneration controls and firms’ cash holdings, utilizing a double-difference approach. Based on an analysis of a sample of listed companies from 2007–2012, the results indicate that firms subject to regulated executive compensation exhibit lower cash holdings. To ensure the robustness of these findings, various statistical techniques such as parallel trend tests, variable replacement, propensity score matching, and placebo tests were employed. Additionally, a mechanism test was conducted, whereby the mediating effect of executive compensation controls on firms’ cash holdings was examined, revealing a reduction in internal agency costs. Finally, the analysis of heterogeneity demonstrated that the impact of executive compensation controls on firms’ cash holdings was more pronounced in companies with high-quality internal controls, stronger management oversight, and lower information asymmetry.

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Section: Plos Onementioning

confidence: 99%