Top executive compensation, regional institutions and Chinese OFDI

Abstract

Integrating agency and institutional theories, this paper examines the impact of top-executive compensation and regional institutions on the outward FDI (OFDI) of a sample of Chinese-listed firms. The results show that top-executive cash pay and equity ownership have a positive association with OFDI. Differing from previous studies focusing on cross-country institutional variances, we take variations in within-country institutions into account and find that regional institutions in terms of product markets, factor markets and legal systems play an important role in OFDI and positively moderate the governance role of managerial equity ownership.

Effects of Sustainability and Technology Orientations on Firm Growth: Evidence from Chinese Manufacturing

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Varieties in state capitalism: Outward FDI strategies of central and local state-owned enterprises from emerging economy countries

“…Furthermore, it would be worthwhile for future studies to incorporate other critical elements such as subnational institutional heterogeneity characterized by the level of institutional quality and socio-economic disparity of local regions. Various studies have pinpointed this factor as having significant impacts on firm performance and internationalization behavior (Liu, Lu, & Chizema, 2014;Ma, Tong, & Fitza, 2013;Meyer, Mudambi, & Narula, 2011;Meyer & Nguyen, 2005) which may also be a source of considerable heterogeneity among SOEs.…”

Are Top Executives Rewarded for Environmental Performance? The Role of the Board of Directors in the Context of China

“…Institutional environment comprises a set of social, legal, and political tenets that govern economic activities (Liu et al 2013). Firms gain, maintain, and repair their legitimacy by conforming to the expectations of institutions and stakeholders, which constitutes the basic thesis of institutional theory (Berrone 2009).…”

“…In line with prior studies in the context of China (Conyon and He 2011; Li et al 2007;Liu et al 2013), top executives' compensation is here defined as the aggregated pay for the three highest-paid top executives, including basic salary, bonus, and other benefits, since, in today's China, very few firms have executive stock option schemes (Conyon and He 2011; Liu et al 2013). This variable is denoted Compensation.…”