Does CEO Pay Dispersion Matter in an Emerging Market? Evidence from China's Listed Firms

Pacific Basin Finance Journal, Forthcoming

36 Pages Posted: 9 Sep 2014

See all articles by Hu Fang

Hu Fang

Griffith University

Xiaofei Pan

University of Wollongong

Gary Gang Tian

Macquarie University - Department of Applied Finance and Actuarial Studies; Macquarie University, Macquarie Business School

Date Written: September 7, 2014

Abstract

This paper examines how the institutional features of emerging economies (i.e., government ownership, political connections, and market reform) influence CEO pay-dispersion incentives. Consistent with our expectation, we find that CEO pay dispersion generally provides a tournament incentive in China’s emerging market, as it is positively associated with firm performance. In addition, tournament incentives are weaker where firms are controlled by the government and where the CEO is politically connected, but it became stronger after the China's split-share structure reforms. Further, we find that in state controlled firms the satisfaction gained by meeting multiple economic and social goals largely reduces the effectiveness of tournament incentives, while the managerial agency problems inherent in private firms might mitigate them.

Keywords: CEO pay dispersion, tournament incentive, political connections, split-share structure reform

JEL Classification: G32; G34

Suggested Citation

Fang, Hu and Pan, Xiaofei and Tian, Gary Gang, Does CEO Pay Dispersion Matter in an Emerging Market? Evidence from China's Listed Firms (September 7, 2014). Pacific Basin Finance Journal, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2492884 or http://dx.doi.org/10.2139/ssrn.2492884

Hu Fang

Griffith University ( email )

170 Kessels Road
Nathan, Queensland QLD 4111
Australia

Xiaofei Pan

University of Wollongong ( email )

Northfields Avenue
Wollongong, New South Wales 2522
Australia

Gary Gang Tian (Contact Author)

Macquarie University - Department of Applied Finance and Actuarial Studies ( email )

Room 513, Building E4A
North Ryde, NSW, 2109
Australia

Macquarie University, Macquarie Business School ( email )

New South Wales 2109
Australia

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