Justifying Top Management Pay in a Transitional Economy

37 Pages Posted: 15 Jul 2010

See all articles by Michael Firth

Michael Firth

Lingnan University - Department of Finance and Insurance

Tak Yan Leung

City University of Hong Kong (CityUHK) - Department of Accountancy

Oliver M. Rui

China Europe International Business School (CEIBS)

Date Written: July 13, 2010

Abstract

We investigate some aspects of top management pay in China’s listed firms. We find positive pay and performance sensitivities and elasticities for top executives. In terms of magnitude, these sensitivities are similar to those reported in U.S. firms during the 1970s. We also find that the pay disparities between top managers and employees are positively related to a firm’s performance. Thus, it appears that any deviation away from a manager-worker compensation norm has to be justified by superior firm performance. In additional analyses, we find that managers’ perquisites are not related to performance.

Keywords: Executive pay, Relative compensation, Perquisites, China

JEL Classification: G30, M52, J32

Suggested Citation

Firth, Michael and Leung, Tak Yan and Rui, Oliver M., Justifying Top Management Pay in a Transitional Economy (July 13, 2010). Available at SSRN: https://ssrn.com/abstract=1639715 or http://dx.doi.org/10.2139/ssrn.1639715

Michael Firth

Lingnan University - Department of Finance and Insurance ( email )

Castle Peak Road
Tuen Mun, New Territories
Hong Kong
China
+852 2616 8160 (Phone)
+852 2466 4751 (Fax)

Tak Yan Leung

City University of Hong Kong (CityUHK) - Department of Accountancy ( email )

83 Tat Chee Avenue
Kowloon
Hong Kong
China

Oliver M. Rui (Contact Author)

China Europe International Business School (CEIBS) ( email )

699 Hong Feng Road
Pudong
Shanghai 201206
China
86-21-28905618 (Phone)
86-21-28905620 (Fax)

HOME PAGE: http://https://www.ceibs.edu/rui-oliver

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