Executive Compensation and Corporate Governance in China

50 Pages Posted: 2 Sep 2008 Last revised: 4 Feb 2014

See all articles by Martin Conyon

Martin Conyon

University of Pennsylvania - The Wharton School; Bentley University

Lerong He

SUNY College at Brockport

Date Written: August 31, 2011

Abstract

We investigate executive compensation and corporate governance in China’s publicly traded firms. We also compare executive pay in China to the USA. Consistent with agency theory, we find that executive compensation is positively correlated to firm performance. The study shows that executive pay and CEO incentives are lower in State controlled firms and firms with concentrated ownership structures. Boardroom governance is important. We find that firms with more independent directors on the board have a higher pay-for-performance link. Non-State (private) controlled firms and firms with more independent directors on the board are more likely to replace the CEO for poor performance. Finally, we document that US executive pay (salary and bonus) is about seventeen times higher than in China. Significant differences in US-China pay persist even after controlling for economic and governance factors.

Keywords: China, Executive Compensation, Incentives

JEL Classification: J33, G15, G34, G38, D82, L32, M41, M52

Suggested Citation

Conyon, Martin and He, Lerong, Executive Compensation and Corporate Governance in China (August 31, 2011). Journal of Corporate Finance, Vol. 17, No. 4, 2011, Available at SSRN: https://ssrn.com/abstract=1261911 or http://dx.doi.org/10.2139/ssrn.1261911

Martin Conyon (Contact Author)

University of Pennsylvania - The Wharton School ( email )

3600 Locust Walk
Philadelphia, PA 19104-6365
United States

Bentley University ( email )

175 Forest Street
Waltham, MA 02145
United States

Lerong He

SUNY College at Brockport ( email )

Geneseo, NY 14454
United States

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