IDEAS home Printed from https://ideas.repec.org/a/jfr/afr111/v8y2019i3p86.html
   My bibliography  Save this article

Government Subsidy, Corporate Pay-Gap and Firm’s Financial Performance: Evidence from China

Author

Listed:
  • Danlu Bu
  • Homayoon Shalchian
  • Rong Huang
  • Fang Hu

Abstract

We analyze the relation between government subsidization and the corporate pay-gap between executives and employees for a relatively large number of Chinese corporations. Our results show that government subsidy, under managerial control, can be used to increase executives’ compensation, and consequently, the corporate pay-gap in China. Our results also show that the effect of government subsidy on the corporate pay-gap is more significant among state-owned enterprises (SOEs) rather than private companies (non-SOEs). Finally, our results suggest that while the total pay-gap between the executives and employees has a positive impact on a firm’s financial success, the pay-gap caused by government subsidy negatively affects the firm’s economic performance. Â

Suggested Citation

  • Danlu Bu & Homayoon Shalchian & Rong Huang & Fang Hu, 2019. "Government Subsidy, Corporate Pay-Gap and Firm’s Financial Performance: Evidence from China," Accounting and Finance Research, Sciedu Press, vol. 8(3), pages 1-86, August.
    • Handle: RePEc:jfr:afr111:v:8:y:2019:i:3:p:86
    as

    Download full text from publisher

    File URL: https://www.sciedupress.com/journal/index.php/afr/article/download/15810/9848
    Download Restriction: no
    File URL: https://www.sciedupress.com/journal/index.php/afr/article/view/15810
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Renée B. Adams & Daniel Ferreira, 2007. "A Theory of Friendly Boards," Journal of Finance, American Finance Association, vol. 62(1), pages 217-250, February.
    2. Fenghua Song & Anjan V. Thakor, 2006. "Information Control, Career Concerns, and Corporate Governance," Journal of Finance, American Finance Association, vol. 61(4), pages 1845-1896, August.
    3. Mara Faccio, 2006. "Politically Connected Firms," American Economic Review, American Economic Association, vol. 96(1), pages 369-386, March.
    4. Conyon, Martin J., 1997. "Corporate governance and executive compensation," International Journal of Industrial Organization, Elsevier, vol. 15(4), pages 493-509, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Bingqiang Li & Shan Wang & Nannan Dong & Jinzhi Li & Xi Li & He Yu, 2023. "Empirical Analysis of Subsidy Industrial Policy’s Effect on Export Innovation in the Chinese Manufacturing," SAGE Open, , vol. 13(4), pages 21582440231, November.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Belot, François & Ginglinger, Edith & Slovin, Myron B. & Sushka, Marie E., 2014. "Freedom of choice between unitary and two-tier boards: An empirical analysis," Journal of Financial Economics, Elsevier, vol. 112(3), pages 364-385.
    2. Tang, Xuesong & Lin, Yan & Peng, Qing & Du, Jun & Chan, Kam C., 2016. "Politically connected directors and firm value: Evidence from forced resignations in China," The North American Journal of Economics and Finance, Elsevier, vol. 37(C), pages 148-167.
    3. Renee B. Adams & Benjamin E. Hermalin & Michael S. Weisbach, 2010. "The Role of Boards of Directors in Corporate Governance: A Conceptual Framework and Survey," Journal of Economic Literature, American Economic Association, vol. 48(1), pages 58-107, March.
    4. Cheng, Lei & Sun, Zhen, 2019. "Do politically connected independent directors matter? Evidence from mandatory resignation events in China," China Economic Review, Elsevier, vol. 58(C).
    5. Caleb Stroup, 2017. "International Deal Experience And Cross-Border Acquisitions," Economic Inquiry, Western Economic Association International, vol. 55(1), pages 73-97, January.
    6. de Haas, Ralph & Ferreira, Daniel & Kirchmaier, Tom, 2017. "The Inner Working of the Board : Evidence from the Emerging Markets," Other publications TiSEM 1c9e446c-ddc1-4efe-96ac-e, Tilburg University, School of Economics and Management.
    7. Rousseau, Peter L. & Stroup, Caleb, 2015. "Director Histories and the Pattern of Acquisitions," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 50(4), pages 671-698, August.
    8. De Haas, Ralph & Ferreira, Daniel & Kirchmaier, Tom, 2021. "The inner workings of the board: Evidence from emerging markets," Emerging Markets Review, Elsevier, vol. 48(C).
    9. Juan Ma & Tarun Khanna, 2013. "Independent Directors’ Dissent on Boards: Evidence from Listed Companies in China," Harvard Business School Working Papers 13-089, Harvard Business School, revised Oct 2013.
    10. Yike Yu & Danting Cao & Zuogong Wang & Zaijie Zhang, 2021. "Does the fellow‐villager relationship between the independent director and the chairman of the board can inhibit the major shareholder expropriation? Evidence from China," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 42(6), pages 1374-1393, September.
    11. Lee, Wei-Ming, 2020. "The determinants and effects of board committees," Journal of Corporate Finance, Elsevier, vol. 65(C).
    12. Wang, Xiaoming & Xu, Tingting, 2022. "Pay of political directors in China," Pacific-Basin Finance Journal, Elsevier, vol. 74(C).
    13. Benjamin E. Hermalin & Michael S. Weisbach, 2012. "Information Disclosure and Corporate Governance," Journal of Finance, American Finance Association, vol. 67(1), pages 195-234, February.
    14. Thomas J. Chemmanur & Viktar Fedaseyeu, 2018. "A Theory of Corporate Boards and Forced CEO Turnover," Management Science, INFORMS, vol. 64(10), pages 4798-4817, October.
    15. Wagner, Alexander F., 2011. "Board independence and competence," Journal of Financial Intermediation, Elsevier, vol. 20(1), pages 71-93, January.
    16. Maria-Eleni K. Agoraki & Manthos D. Delis & Panagiotis K. Staikouras, 2010. "The effect of board size and composition on bank efficiency," International Journal of Banking, Accounting and Finance, Inderscience Enterprises Ltd, vol. 2(4), pages 357-386.
    17. Isaka, Naoto, 2017. "When are uninformed boards preferable?," Pacific-Basin Finance Journal, Elsevier, vol. 46(PA), pages 191-211.
    18. repec:dau:papers:123456789/9552 is not listed on IDEAS
    19. Cook, Douglas O. & Wang, Huabing (Barbara), 2011. "The informativeness and ability of independent multi-firm directors," Journal of Corporate Finance, Elsevier, vol. 17(1), pages 108-121, February.
    20. Ahsan Habib & Md. Borhan Uddin Bhuiyan & Mostafa Monzur Hasan, 2018. "Firm life cycle and advisory directors," Australian Journal of Management, Australian School of Business, vol. 43(4), pages 575-592, November.
    21. Ana Hidalgo-Cabrillana, 2013. "Endogenous governance transparency and product market competition," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 4(1), pages 113-136, March.

    More about this item

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:jfr:afr111:v:8:y:2019:i:3:p:86. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sciedu Press (email available below). General contact details of provider: https://edirc.repec.org/data/cepflch.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.