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Executive Compensation Stickiness And Peer Group Benchmarks: Evidence From Chinese Firms

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  • Zhiqiang Lu
  • Sarath Abeysekera
  • Hongyu Li

Abstract

This paper examines the phenomenon and effect of peer group on executive compensation stickiness in China's listed firms. We find there has been substantial growth in executive compensation in the past 10 years. Consistent with agency theory, executive compensation is positively related to firm performance. However, pay-for-performance sensitivity is asymmetric, and it is lower when firm performance declines suggesting that there is a characteristic of executive compensation stickiness in Chinese firms. Further, we test the effect of peer group on compensation stickiness. We find that the characteristic of compensation stickiness only exists in the firms whose executive compensation is lower than the compensation of peer group. The evidence suggests that compensation stickiness is an important mechanism to provide retention incentives to firm managers, rather than an agency problem in Chinese firms

Suggested Citation

  • Zhiqiang Lu & Sarath Abeysekera & Hongyu Li, 2015. "Executive Compensation Stickiness And Peer Group Benchmarks: Evidence From Chinese Firms," The International Journal of Business and Finance Research, The Institute for Business and Finance Research, vol. 9(5), pages 25-36.
    • Handle: RePEc:ibf:ijbfre:v:9:y:2015:i:5:p:25-36
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    References listed on IDEAS

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    Cited by:

    1. Clement Olalekan Olaniyi & Olaolu Richard Olayeni, 2020. "A new perspective into the relationship between CEO pay and firm performance: evidence from Nigeria’s listed firms," Journal of Social and Economic Development, Springer;Institute for Social and Economic Change, vol. 22(2), pages 250-277, December.
    2. Clement Olalekan Olaniyi & Ademola Obafemi Young & Xuan Vinh Vo & Mamdouh Abdulaziz Saleh Al‐Faryan, 2022. "Do institutional framework and its threshold matter in the sensitivity of CEO pay to firm performance? Fresh insights from an emerging market economy," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(8), pages 3386-3403, December.

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    More about this item

    Keywords

    Corporate Governance; Pay-For-Performance Sensitivity; Peer Group; Compensation Stickiness;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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