Justifying Top Management Pay in a Transitional Economy
37 Pages Posted: 15 Jul 2010
Date Written: July 13, 2010
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
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