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Corporate governance, product market competition and managerial incentives: Evidence from four Pacific Basin countries

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  • Ko, Hin-cheung Annie
  • Tong, Yixing (Jamie)
  • Zhang, Feida (Frank)
  • Zheng, Guojian

Abstract

This paper examines how firm-level governance mechanisms affect the role of competition in influencing managerial incentives. Specifically, we examine how concentrated ownership structures affect the positive association between competition and pay-performance sensitivity. Using samples from four Pacific Basin markets, namely, China, Hong Kong, Singapore, and Taiwan, from 2001 to 2012, we found that competition leads to strong pay-performance sensitivity for widely-held firms, but not for family- or state-controlled firms. This result suggests that the governance role of industry competition is weakened when firms are controlled by family or the state. Our study deepens our understanding on how product market competition shapes managerial incentives and offers insights to policy makers who are interested in enhancing the effectiveness of industry-level corporate governance in shaping managerial incentives.

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  • Ko, Hin-cheung Annie & Tong, Yixing (Jamie) & Zhang, Feida (Frank) & Zheng, Guojian, 2016. "Corporate governance, product market competition and managerial incentives: Evidence from four Pacific Basin countries," Pacific-Basin Finance Journal, Elsevier, vol. 40(PB), pages 491-502.
    • Handle: RePEc:eee:pacfin:v:40:y:2016:i:pb:p:491-502
    DOI: 10.1016/j.pacfin.2016.10.009
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    2. Riaqa Mubeen & Dongping Han & Jaffar Abbas & Iftikhar Hussain, 2020. "The Effects of Market Competition, Capital Structure, and CEO Duality on Firm Performance: A Mediation Analysis by Incorporating the GMM Model Technique," Sustainability, MDPI, vol. 12(8), pages 1-18, April.
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    5. Dyballa, Katharina & Kraft, Kornelius, 2018. "Foreign Competition and Executive Compensation in the Manufacturing Industry: A Comparison between Germany and the U.S," IZA Discussion Papers 11713, Institute of Labor Economics (IZA).
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    11. Abbas, Jaffar & Balsalobre-Lorente, Daniel & Amjid, Muhammad Asif & Al-Sulaiti, Khalid & Al-Sulaiti, Ibrahim & Aldereai, Osama, 2024. "Financial innovation and digitalization promote business growth: The interplay of green technology innovation, product market competition and firm performance," Innovation and Green Development, Elsevier, vol. 3(1).
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