Informativeness of performance measures and Chinese executive compensation

Cordeiro, James J.; He, Lerong; Conyon, Martin J.; Shaw, Tara Shankar

doi:10.1007/s10490-013-9353-9

Cited by 44 publications

(36 citation statements)

References 48 publications

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“…2. The choice of firm performance measure is consistent with prior Chinese corporate governance studies that have typically found that accounting performance is much more widely utilized than stock market performance in Chinese top executive pay and turnover (e.g., Chang & Wong, 2009;Conyon & He, 2011, 2014Cordeiro et al, 2013;Firth et al, 2006Firth et al, , 2007 3. We use the command suest in Stata 12 to perform this test.…”

Section: Acknowledgementsupporting

confidence: 57%

CEO Overpayment and Dismissal: The Role of Attribution and Attention

He¹,

Fang²

2015

Corporate Governance

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Manuscript Type: EmpiricalResearch Question/Issue: This study investigates the moderating role of CEO overpayment on the relationship between firm performance and CEO dismissal. We also examine how contextual factors, including compensation disclosure regulation, firm index status, and firm age, influence board attention and attribution, and consequently affect the sensitivity of CEO dismissal to firm performance. Research Findings/Insights: Using a sample of Chinese listed firms between 2002 and 2011, we find that overpaid CEOs are associated with a larger likelihood of dismissal in case of poor firm performance compared to their underpaid counterparts. In addition, CEO overpayment has a larger influence on the turnover-performance relationship when executive compensation disclosure is mandatory, when a firm is index-included, or younger. Theoretical/Academic Implications: This study provides empirical support for attribution theory and the attention-based view. Built on the concept of bounded rationality, it demonstrates that board sense-making and causal attributions affect the CEO dismissal decision. Our study also sheds light on the influence of situational cues on shaping board attention and subsequent corporate governance decisions. Practitioner/Policy Implications: This study offers insights to policymakers interested in enhancing the design of corporate governance mechanisms by paying attention to cognitive processes in the boardroom.

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Section: Acknowledgementsupporting

confidence: 57%

CEO Overpayment and Dismissal: The Role of Attribution and Attention

He¹,

Fang²

2015

Corporate Governance

Self Cite

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“…year (Cordeiro, He, Conyon, & Shaw, 2013). Leverage proxies for firm's risk and represents a firm's capital structure; this is measured as total debts divided by total assets (Firth, Leung, & Rui, 2010).…”

Section: Methodsmentioning

confidence: 99%

The use of nonfinancial performance measures in CEO bonus compensation

Cho

Ibrahim

Yan

2019

Corporate Governance

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Research Question/Issue In this study, we explore the relationship between the use of nonfinancial performance measures in Chief Executive Officer (CEO) bonus plans and CEO power, moderated by compensation committee monitoring. Furthermore, we investigate whether the inclusion of nonfinancial performance measures is associated with higher CEO bonus pay sensitivity to shareholder returns. Research Findings/Insights Using a sample of FTSE 350 firms during the period 2007–2013, we find that CEO power is significantly negatively related to the propensity of using nonfinancial performance measures. This negative relationship, however, is moderated by higher levels of compensation committee monitoring. We also find that firms combining nonfinancial and financial performance measures in CEO bonus plans tend to have stronger CEO bonus pay sensitivity to shareholder returns than firms using financial measures alone. Thus, our results suggest that boards of directors adopting nonfinancial performance measures are able to better align CEO incentives with shareholder interests. We find similar results when using the weight of nonfinancial performance measures in the bonus plan in our analyses. Theoretical/Academic Implications This study empirically supports the managerial power theory whereby powerful CEOs influence the choice of performance measures in their bonus plans. However, effective compensation committees are found to attenuate the influence of powerful CEOs and to better align their interests with those of shareholders. Our result of stronger bonus pay sensitivity to shareholder returns for firms combining nonfinancial with financial performance measures implies that the informativeness of these measures enhances the firm's ability to tie CEO bonus compensation to shareholder wealth. Practitioner/Policy Implications This study offers insights to members of boards of directors, especially compensation committee members, who are interested in improving the design of executive incentive contracts to better align managerial incentives to shareholder interests. Furthermore, the findings inform regulators about the importance of alternative performance measures in pay‐performance sensitivity and may warrant increased firm disclosure of the details of the pay structure.

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“…Firms located in different regions have a heterogeneous institutional environment [89]. The market development process or the "marketization" level has achieved different growth level among provinces [90]. Typically, central and western provinces are less developed than eastern coastal areas in term of per capita foreign investment, Gross Domestic Product (GDP), and so on [91].…”

Section: Hypothesismentioning

confidence: 99%

Sub-National Institutional Contingencies and Corporate Social Responsibility Performance: Evidence from China

et al. 2019

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This study investigates the relationship between sub-national institutional contingencies and corporate social responsibility performance (CSRP). Sub-national institutional contingencies (SNICs) play a moderating role in the link between CSRP and corporate financial performance (CFP). Using data from all A-share Chinese companies listed on the Shenzhen and Shanghai exchanges for the period 2010 to 2015, ordinary least square (OLS) regression was used as a baseline methodology to draw inferences from the data. The study uses propensity score matching (PSM) to confirm the robustness and to tackle the possible issue of endogeneity. We find reliable evidence that SNICs have a positive and significant effect on CSRP. This positive relationship is more pronounced in cross-listed companies as compared to state-owned enterprises (SOEs) and in companies located in the more developed region. Moreover, SNICs moderate the positive relationship between CSRP and CFP. The relationship is stronger in firms that are non-SOEs, are non-cross-listed, and are from less-developed regions as compared to their counterparts. The findings provide implications for regulators and individual companies. Investment in corporate social responsibility (CSR) helps companies to achieve their primary objective (i.e., financial performance). With respect to practical implications, the study indicates that policymakers, executives, and managers should refrain from “one size fits all” CSR policies. Instead, they need to simultaneously evaluate the effects of regional development, cross-listing, and ownership characteristics. Considering weak social performance by firms that are from less developed regions, are non-cross-listed, and that are non-SOEs, policymakers and the government should improve information transparency and the regulatory framework, and provide these firms with incentives. This study also provides insights for other emerging economies, especially those going through extraordinary government interventions.

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Informativeness of performance measures and Chinese executive compensation

Cited by 44 publications

References 48 publications

CEO Overpayment and Dismissal: The Role of Attribution and Attention

CEO Overpayment and Dismissal: The Role of Attribution and Attention

The use of nonfinancial performance measures in CEO bonus compensation

Sub-National Institutional Contingencies and Corporate Social Responsibility Performance: Evidence from China

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