Government Ownership, Top Management Teams’ Pay Dispersion, and Firm Performance

73 Pages Posted: 30 Jul 2018 Last revised: 11 Oct 2021

See all articles by Wei Jiang

Wei Jiang

Jinan University

Bin Ke

National University of Singapore

Hong Ru

Nanyang Business School, Nanyang Technological University

Yue Xu

Sun Yat-sen University (SYSU)

Date Written: October 7, 2021

Abstract

We examine the effect of government ownership on top management teams’ (TMTs’) pay dispersion and how such government ownership-driven pay dispersion affects subsequent firm performance. Using data from publicly listed Chinese firms, we show that TMT pay dispersion for SOEs is only two-thirds of that for non-SOEs. Among the SOEs, TMT pay dispersion is lower for central government-controlled SOEs, especially those whose CEOs or chairmen have greater prospects for political promotions. In addition, CEOs of central government-controlled SOEs are more likely to receive political promotions when their firms’ TMT pay dispersion is lower. TMT pay dispersion resulting from government ownership is positively associated with subsequent firm performance. Our results hold for both vertical pay dispersion between the CEO and non-CEO TMT members and horizontal pay dispersion among non-CEO TMT members. Overall, these findings are consistent with the social-political view, which assumes that SOEs pursue broader social and political objectives preferred by the government, and is inconsistent with several economic theories that assume that firms pursue shareholder value maximization.

Keywords: top management team; managerial pay dispersion; China; government control; firm performance

JEL Classification: D73, G30, L33

Suggested Citation

Jiang, Wei and Ke, Bin and Ru, Hong and Xu, Yue, Government Ownership, Top Management Teams’ Pay Dispersion, and Firm Performance (October 7, 2021). Available at SSRN: https://ssrn.com/abstract=3221600 or http://dx.doi.org/10.2139/ssrn.3221600

Wei Jiang (Contact Author)

Jinan University ( email )

Huang Pu Da Dao Xi 601, Tian He District
Guangzhou, Guangdong 510632
China

Bin Ke

National University of Singapore ( email )

Mochtar Riady Building, BIZ 1, #07-53
15 Kent Ridge Drive
Singapore, 119245
Singapore
+6566013133 (Phone)

Hong Ru

Nanyang Business School, Nanyang Technological University ( email )

Singapore, 639798
Singapore
(+65) 67904661 (Phone)

HOME PAGE: http://https://hongru.mit.edu/

Yue Xu

Sun Yat-sen University (SYSU) ( email )

Guangzhou, Guangdong
China

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