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How do market forces affect executive compensation in Chinese state-owned enterprises?

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  • Hu, Fang
  • Tan, Weiqiang
  • Xin, Qingquan
  • Yang, Sixian

Abstract

This paper studies how the evolution of market forces affects executive compensation in China's listed state-owned enterprises (SOEs) from 2000–2007. Along with the progress of market reforms we find that the level of executive compensation increases gradually and the relation between compensation and performance becomes more sensitive. However, the effect of market forces on executive compensation in SOEs is limited by CEOs' political connections. Our findings suggest that introducing exogenous market forces alone may not be sufficient to ensure the effectiveness of governance structure in a transition economy.

Suggested Citation

  • Hu, Fang & Tan, Weiqiang & Xin, Qingquan & Yang, Sixian, 2013. "How do market forces affect executive compensation in Chinese state-owned enterprises?," China Economic Review, Elsevier, vol. 25(C), pages 78-87.
    • Handle: RePEc:eee:chieco:v:25:y:2013:i:c:p:78-87
    DOI: 10.1016/j.chieco.2013.03.002
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    More about this item

    Keywords

    Market-oriented reform; Executive compensation; Pay-performance sensitivity; China;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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