CEO Compensation and Corporate Governance in China

18 Pages Posted: 6 Nov 2012

See all articles by Martin J. Conyon

Martin J. Conyon

Bentley University; Wharton School, Center for Human Resources

Lerong He

State University of New York (SUNY) College at Brockport

Multiple version iconThere are 2 versions of this paper

Date Written: November 2012


Manuscript Type. Empirical.

Research Questions. This study investigates the determination of Chinese CEO pay. We focus on three related questions: (1) Is Chinese CEO pay related to firm performance? (2) Are CEO pay dynamics important? (3) Does corporate governance affect CEO pay and equity incentives in China?.

Research Findings. Using data on CEO compensation in China's public traded firms from 2000 to 2010, we document significant changes in CEO pay, ownership and board structure. We document that CEO pay is positively correlated to both accounting and stock market performance, although the link to accounting performance is more robust. We find that CEO pay dynamics are important as pay in the current year is significantly positively correlated to CEO pay the previous year. We also find that CEO equity ownership and equity grants are influenced by board and ownership structure.

Theoretical/Academic Implications. This study supplements the standard agency theory approach to executive compensation with insights gained from the dynamics of wage setting theory developed in the labor economics field. It predicts that incomplete information and learning lead to adjustment costs and non‐instantaneous changes in CEO pay.

Practitioner/Policy Implications. This study offers insights to policy makers interested in enhancing the design of executive compensation and internal corporate governance within transition economies.

Keywords: Corporate Governance, CEO Pay, China, Wage Dynamics

Suggested Citation

Conyon, Martin J. and He, Lerong, CEO Compensation and Corporate Governance in China (November 2012). Corporate Governance: An International Review, Vol. 20, Issue 6, pp. 575-592, 2012, Available at SSRN: or

Martin J. Conyon (Contact Author)

Bentley University ( email )

175 Forest Street
Waltham, MA 02145
United States

Wharton School, Center for Human Resources ( email )

3600 Locust Walk
Philadelphia, PA 19104-6365
United States

Lerong He

State University of New York (SUNY) College at Brockport ( email )

Brockport, NY 14420
United States

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