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Disproportional ownership structure and pay–performance relationship: evidence from China’s listed firms

Cao, Jerry, Pan, Xiaofei and Tian, Gary 2011, Disproportional ownership structure and pay–performance relationship: evidence from China’s listed firms, Journal of Corporate Finance, vol. 17, no. 3, pp. 541-554, doi: 10.1016/j.jcorpfin.2011.02.006.

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Title Disproportional ownership structure and pay–performance relationship: evidence from China’s listed firms
Author(s) Cao, Jerry
Pan, Xiaofei
Tian, Gary
Journal name Journal of Corporate Finance
Volume number 17
Issue number 3
Start page 541
End page 554
Total pages 14
Publisher Elsevier
Place of publication Amsterdam, The Netherlands
Publication date 2011
ISSN 0929-1199
Keyword(s) Managerial compensation
Firm performance
Ownership structure
Summary This paper examines the impact of ownership structure on executive compensation in China's listed firms. We find that the cash flow rights of ultimate controlling shareholders have a positive effect on the pay–performance relationship, while a divergence between control rights and cash flow rights has a significantly negative effect on the pay–performance relationship. We divide our sample based on ultimate controlling shareholders' type into state owned enterprises (SOE), state assets management bureaus (SAMB), and privately controlled firms. We find that in SOE controlled firms cash flow rights have a significant impact on accounting based pay–performance relationship. In privately controlled firms, cash flow rights affect the market based pay–performance relationship. In SAMB controlled firms, CEO pay bears no relationship with either accounting or market based performance. The evidence suggests that CEO pay is inefficient in firms where the state is the controlling shareholder because it is insensitive to market based performance but consistent with the efforts of controlling shareholders to maximize their private benefit.
Language eng
DOI 10.1016/j.jcorpfin.2011.02.006
Field of Research 150201 Finance
Socio Economic Objective 900101 Finance Services
HERDC Research category C1.1 Refereed article in a scholarly journal
ERA Research output type C Journal article
Copyright notice ©2011, Elsevier
Persistent URL http://hdl.handle.net/10536/DRO/DU:30078295

Document type: Journal Article
Collection: Department of Finance
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