Restricting CEO Pay Backfires: Evidence from China

Bae, Kee‐Hong; Gong, Zhaoran; Tong, Wei

doi:10.2139/ssrn.3081822

Cited by 9 publications

(32 citation statements)

References 37 publications

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“…However, the incentives offered to executives in Chinese firms differ from those used in the US. Equity compensation in the forms of stock options granted to executives is only permitted since 2006 in China and is very rare (Bae et al, 2019;Bryson et al, 2014;Cheng et al, 2015;Conyon and He, 2016). During our sample period (2006-2015), on average no more than 10% of firms granted stock options or restricted stocks to executives in each year (authors' calculation based on the CSMAR data).…”

Section: Description Of Variables 331 Pay Gapmentioning

confidence: 99%

“…In our study, we follow previous studies (Bae et al, 2019;Bryson et al, 2014;Cheng et al, 2015;Conyon and He, 2016) to use total cash remuneration, as Chinese listed firms disclose the total cash payment without dividing it into salary and bonus and the equity-based compensation constitutes a very small percentage of total compensation in Chinese firms 7 .…”

Section: Description Of Variables 331 Pay Gapmentioning

confidence: 99%

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Tournament incentives, age diversity and firm performance

Talavera

Yin

Mao

2021

Journal of Empirical Finance

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This study introduces a new dimension, age diversity of non-CEO executives, which moderates the relationship between promotion-based tournament incentives, measured as the pay gap between the CEO and non-CEO executives, and firm performance. For a sample of Chinese listed firms from 2005 to 2015, we find that the tournament incentives for non-CEO executives relate positively to firm performance. This relationship is weaker when non-CEO executives are from different age cohorts, whereas the tournament effect is enhanced when non-CEO executives are from the same age cohort. The negative moderation effect of age diversity is more pronounced in state firms and in the Northern China Plain cultural region. The negative moderation effect disappears in firms with CEOs who have overseas experience. We reason that the peer pressure among the similar-aged non-CEO executives enhances the tournament competition and that age hierarchy reduces incentives for younger executives to compete. Our findings have important implications for firms not only in China, but also in countries and regions where seniority is highly valued when setting executive compensation and optimizing organizational structure.

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Section: Description Of Variables 331 Pay Gapmentioning

confidence: 99%

Section: Description Of Variables 331 Pay Gapmentioning

confidence: 99%

Tournament incentives, age diversity and firm performance

Talavera

Yin

Mao

2021

Journal of Empirical Finance

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“…Fang et al (2018) discover that the perks used to build political rapport declined after the 18th National Congress of the Chinese Communist Party, or after the anti-corruption campaign. However, CEOs, especially of centrally administered SOEs in China, who subject to pay restrictions imposed by Chinese central government, make more perk consumption in their own interest (Bae et al, 2019).…”

Section: Research On Managerial Perksmentioning

confidence: 99%

Do policy burdens induce excessive managerial perks? Evidence from China’s stated-owned enterprises

Jian

Meng

et al. 2020

Economic Modelling

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This paper explores the effect of policy burdens of China's state-owned enterprises (SOEs) on senior executives' excessive perks. The empirical analysis demonstrates that SOE policy burdens are significantly and positively correlated with senior executives' excessive perks, indicating that SOE policy burdens increase agency cost. The results hold after controlling for potential endogeneity. Moreover, we find the following evidences. Strategic policy burdens of SOEs have a significantly greater impact on their senior executives' excessive perks, compared with social policy burdens. The positive impact of SOE policy burdens on excessive perks is significantly weaker in east China due to the higher degree of marketization. The central government's stricter supervision can also alleviate the positive correlation between policy burdens of centrally administered SOEs and senior executives' excessive perks. ☆ This work was supported by the fundamental research cultivation fund of Zhongnan University of Economics and Law [2722020PY021].

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“…In the last decade, the European Union has set a limit to salaries in the banking sector, Switzerland has given shareholders a binding say-on-pay vote, and the U. high incomes and announced an agenda to pursue "common prosperity". 19 However, the literature does not always support curbing executive compensation, as it can be ineffective or lead to unintended consequences (Bae et al, 2021;Lin, 2014): "The goal of pay reform should be to incentivise leaders to create long-run value for society, rather than reduce the level of pay" (Edmans, 2020).…”

Section: Appendix: Additional Tables and Empirical Resultsmentioning

confidence: 99%

“…Executive and directors' compensation in SOEs has received particular attention from the government and is heavily regulated (Lin, 2014). There are pay ceilings for executive compensation, and after a reform in 2013, the growth rate of executive compensation in SOEs cannot exceed that of ordinary employees (Bae et al, 2021). Consistent with these results and regulations, Chizema et al (2015) find that firms with politically-connected directors pay lower levels of compensation to top executives.…”

Section: Literature and Hypothesis Developmentmentioning

confidence: 89%

Three essays on connections and corporate governance: Evidence from China

Alonso¹

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AgradecimientosEn este viaje hacia una tesis me he sentido a menudo como Penélope -tejer y destejer...hasta llegar al tapiz que hoy he presentado y que, como la vida misma, está lejos de acabado. En esta labor de hilandera, me han acompañado personas a las que debo un agradecimiento sincero.Gracias a Dios, hemos llegado hasta aquí.Gracias a mis padres, por el amor a la verdad y al esfuerzo. Gracias a mis padres y a mi hermana, por su confianza. Gracias a mi padre, porque para él no hay nada imposible, y a mi madre por ponerme los pies en la tierra: hija mía, explícame otra vez para qué sirve lo que escribes. También memorables todas las llamadas en las que, teléfono en una mano y papel y boli en la otra, apuntaba las fechas de los congresos, los nombres de los journals a los que enviaba los papers... porque si no, en sus palabras, "luego no sé contarle bien a tu padre." Mamá, cómo explicarte que, en mi idealismo, de vez en cuando, cuando investigo, el velo del misterio se descubre un poco, y queda al descubierto algún destello de verdad.Gracias a Irene y a Luis, que su familia es siempre un lugar donde sentirse como en casa.Esta tesis llega casi a la vez que mi sobrino Luis, que seguro será un gran investigador, en cualquiera de las maneras de esta palabra.Gracias a mi director de tesis, Germán, y también a Antonio siempre cercanos y animándome a disfrutar de esta labor de enhebrar la aguja con publicaciones, congresos y docencia.Gracias a Marta y Mireia, por iniciarme en el arte del tejido académico, por demostrarme cómo puede una mujer llegar lejos en la investigación y tener muy cerca a su familia.Me enseñaron que no hay camino recto, pero que lo importante es tener clara la meta sin perder lo importante por el camino. En ese año en el IESE aprendí muchas cosas y soñé muchas más. Gracias a Kinga, Misia y Patricia, con las que compartí grandes conversaciones sobre Economía, desarrollo, finanzas... entretejidas con hilos de cómo ser profesionales generosas, amigas leales y, gran aspiración, buenas personas.Gracias a mis compañeros de doctorado, Willy, Andrea, Juli, y especialmente a Bea -con ella entendí cómo la suma de las partes hace el resultado mejor que la que cualquiera de las partes hubiera alcanzado por sí misma. Trabajar así hace que la investigación se convierta en un reto y una aventura a la que merece la pena dedicarse.Muchas anécdotas quedan tejidas en el tapiz de estos años en los que no puedo dejar de dar las gracias a las ovejas naranjas del CM Olabidea, muchas de ellas alumnas de la facultad de Económicas, otras médicos, enfermeras, comunicadoras, filósofas o bioquímicas.Gracias a ellas y a todas las que habéis sentido como propios los nudos y rotos de cada paper, y habéis celebrado por todo lo alto el más mínimo avance. Está claro que estáis todas en este tapiz como hoy estáis aquí presentes.

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Restricting CEO Pay Backfires: Evidence from China

Cited by 9 publications

References 37 publications

Tournament incentives, age diversity and firm performance

Tournament incentives, age diversity and firm performance

Do policy burdens induce excessive managerial perks? Evidence from China’s stated-owned enterprises

Three essays on connections and corporate governance: Evidence from China

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