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State Ownership, Corporate Tournament And Executive Compensation: Evidence From Public Listed Firms In China

Author

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  • DONGWEI SU

    (Department of Finance, College of Economics, Jinan University, Guangzhou, Guangdong 510632, China)

Abstract

This article tests several predictions of tournament theory on executive compensation in the context of a transition economy. Using an unbalanced panel of 34,701 executives in 1,386 public listed firms in China during 1999 and 2006, the paper finds that (1) pay increases as executives move up the corporate hierarchy into higher ranks; (2) pay gap is the largest between the first- and second-tier executives; (3) pay dispersion increases with the number of tournament participants and the risk of the business environment; (4) state ownership of shares reduces pay, pay gap and the sensitivities of the contestant pool and business risk to pay dispersion; (5) board composition and independence, CEO duality and the independence of the supervisory committee all affect pay and pay dispersion. Overall, this paper shows that listed firms in China, as they become more and more market-oriented, have adopted a pay structure that is largely consistent with the predictions of tournament theory, and that it is important to consider both state ownership and corporate governance in analyzing executive compensation structure.

Suggested Citation

  • Dongwei Su, 2011. "State Ownership, Corporate Tournament And Executive Compensation: Evidence From Public Listed Firms In China," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 56(03), pages 307-326.
    • Handle: RePEc:wsi:serxxx:v:56:y:2011:i:03:n:s021759081100433x
    DOI: 10.1142/S021759081100433X
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    Citations

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    Cited by:

    1. Xunan Feng & Anders C. Johansson, 2017. "CEO Incentives in Chinese State-Controlled Firms," Economic Development and Cultural Change, University of Chicago Press, vol. 65(2), pages 223-264.
    2. Peng Xu & Guiyu Bai, 2019. "Board Governance, Sustainable Innovation Capability and Corporate Expansion: Empirical Data from Private Listed Companies in China," Sustainability, MDPI, vol. 11(13), pages 1-17, June.
    3. Mixon Jr., Franklin G. & Gómez-Mejia, Luis R., 2020. "The Competitive Struggle to Win Tournaments: The Allies’ Race to Capture Adolf Hitler’s Eagle’s Nest," American Business Review, Pompea College of Business, University of New Haven, vol. 23(1), pages 3-17, May.

    More about this item

    Keywords

    Executive compensation; tournament theory; state ownership; corporate governance; China; J31; G30; P31;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • P31 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - Socialist Enterprises and Their Transitions

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