Executive Compensation and the Split Share Structure Reform in China

The European Journal of Finance, Forthcoming

40 Pages Posted: 18 May 2012 Last revised: 30 Apr 2013

See all articles by Wenxuan Hou

Wenxuan Hou

University of Edinburgh - Business School; Shanghai Lixin University of Accounting and Finance

Edward Lee

University of Manchester - Alliance Manchester Business School

Konstantinos Stathopoulos

The University of Manchester - Alliance Manchester Business School

Zhenxu Tong

University of Exeter

Date Written: March 1, 2013

Abstract

The Split Share Structure Reform in China enables state shareholders of listed firms to trade their restricted shares. This renders the wealth of state shareholders more related to share price movements. We predict this reform will create remuneration arrangements that increase the relationship between Chinese firms’ executive pay and stock market performance. We confirm this prediction by showing such effect among state-controlled firms and especially those where dominant shareholders have greater incentives to improve share return performance. Our results indicate this reform strengthens the accountability of executives to external monitoring by stock market and therefore benefit minority shareholders in China. (First version: 29 March 2010)

Keywords: Executive compensation, Split Share Structure Reform, State Ownership, China

JEL Classification: G32, J33

Suggested Citation

Hou, Wenxuan and Lee, Edward and Stathopoulos, Konstantinos and Tong, Zhenxu, Executive Compensation and the Split Share Structure Reform in China (March 1, 2013). The European Journal of Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2060942 or http://dx.doi.org/10.2139/ssrn.2060942

Wenxuan Hou (Contact Author)

University of Edinburgh - Business School ( email )

University of Edinburgh
29 Buccleuch Place
Edinburgh, Scotland EH8 9JS
United Kingdom

HOME PAGE: http://www.wenxuanhou.com

Shanghai Lixin University of Accounting and Finance ( email )

Edward Lee

University of Manchester - Alliance Manchester Business School ( email )

Booth St. West (Crawford House)
Manchester, M15 6PB
United Kingdom

Konstantinos Stathopoulos

The University of Manchester - Alliance Manchester Business School ( email )

AMBS Building
Booth Street West
Manchester, M15 6PB
United Kingdom
+44 161 275 6863 (Phone)
+44 161 275 4023 (Fax)

HOME PAGE: http://www.research.manchester.ac.uk/portal/K.Stathopoulos.html

Zhenxu Tong

University of Exeter ( email )

Northcote House
The Queen's Drive
Exeter, Devon EX4 4QJ
United Kingdom

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