Author: 李秀川
Li, Xiuchuan
Title: 中国国有控股上市公司经营管理人员薪酬与业绩之关系
Zhongguo guo you kong gu shang shi gong si jing ying guan li ren yuan xin chou yu ye ji zhi guan xi
Other Title: Executive compensation and corporate performance : evidence from listed companies in China
Degree: D.B.A.
Year: 2004
Subject: Hong Kong Polytechnic University -- Dissertations.
Executives -- Salaries, etc. -- China.
Corporations -- China.
Department: Graduate School of Business
Pages: xvi, 158 leaves ; 30 cm.
Language: Chinese
Abstract: In recent years various theories such as the agency theory have been advanced to explain the relationship between executive compensation and corporate performance. For example, from the agency theory perspective, tying executive compensation to corporate performance is an effective mechanism to reduce agency problems. The objective of this dissertation is to examine the relationship between executive compensation and corporate performance in China. Prior research based on U.S. firms finds a significant relationship between the two, although economically small in magnitude. Empirical results based on Chinese listed firms also suggest a weak or no relationship between the two. We extend the literature by paying particular attention to other firm characteristics such ownership structure, firm size, geographic location, and industry effect. Using data for all listed companies in Shenzhen and Shanghai in 2001 and 2002, we summarize our major findings as follows: First, executive compensation is weakly, but statistically significantly, related to corporate performance. Relative to other companies, the correlation between compensation and performance is higher for state-controlled firms. In an attempt to establish causality between the two variables, we find that it's the compensation that is driving the performance. That is, higher compensation leads to better performance. Further multivariate regression analyses show corporate performance is positively influenced not only by executive compensation, but also by the level of state ownership. Executive compensation is positively related to firm size. In addition, executive compensation varies across different industries. For example, average executive compensation is the highest for electronics and communications industries, followed by financials, real estate and construction materials, transportation, and manufacturing. Furthermore, on average, top management enjoys higher compensations in regulated industries than competitive industries. Executive compensation as a percentage of total profits among state-controlled firms rises over time, suggesting there is not any significant ratchet effect; whereas for non-state controlled firms, there exists some evidence of the ratchet effect. Interestingly, we find that compensation differentials between top management (Board chairperson, CEO, President) and other executives are positively related to performance. Finally, executive compensation differs across geographical locations. The average compensation is the highest for firms located in Guangdong, followed by Beijing, Shanghai, the other coastal provinces, and the inland provinces. The findings above have some important implications. First, to the extent that compensation helps corporate performance, executive compensation should be increased, especially for state-controlled firms, to better align the interests of shareholders and management. Secondly, when designing executive compensation, the government (the controlling shareholder for many listed firms) must be aware that the scheme must be flexible to allow for differences in industries, firm size, and geographic locations. Finally, our results seem to suggest that inequality in management compensation may be good for performance, a finding rather inconsistent with the traditional, egalitarian view. Perhaps, managers in China are ready to accept more incentives-compatible, rather than egalitarian, compensation arrangements.
Rights: All rights reserved
Access: restricted access

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