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Ownership Structure, Acquisitions And Executive Compensation: Evidence From Publicly Listed Chinese Companies

Author

Listed:
  • LILI KANG

    (Shanghai Lixin University of Accounting and Finance, Shanghai, P. R. China)

  • SAJID ANWAR

    (Shanghai Lixin University of Accounting and Finance, Shanghai, P. R. China2University of the Sunshine Coast, Sippy Downs, Australia)

  • FEI PENG

    (Shanghai Lixin University of Accounting and Finance, Shanghai, P. R. China)

Abstract

Using panel data from China’s publicly listed companies (PLCs), this paper investigates the relationship between acquisitions and executive compensation. Empirical analysis based on panel regression reveals that acquisitions lead to a significant increase in executive compensation. Further evaluation, using disaggregated data, shows that acquisitions have a significant and positive impact of executive compensation of state-owned PLCs, but its effect on executive compensation paid by private-owned PLCs is statistically insignificant. The state-owned PLCs give less weight to financial performance compared with private-owned PLCs. State ownership and shareholding concentration increase the executive compensation, which gives rise to a principal–principal type problem. Moreover, using the generalized propensity score (GPS) methodology, which allows one to control for the presence of the selection bias, we find that the compensation-increasing effect of acquisitions for the top executive managers is higher than the effect for the top board directors. Finally, once the selection bias is taken into account, we find that acquisitions have almost no effect on the compensation of lower level executive managers and board directors, which suggests the presence of a principal–agent type problem in the two-tiered governance structure of the Chinese PLCs.

Suggested Citation

  • Lili Kang & Sajid Anwar & Fei Peng, 2023. "Ownership Structure, Acquisitions And Executive Compensation: Evidence From Publicly Listed Chinese Companies," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 68(01), pages 285-315, March.
    • Handle: RePEc:wsi:serxxx:v:68:y:2023:i:01:n:s0217590820500113
    DOI: 10.1142/S0217590820500113
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    More about this item

    Keywords

    Acquisition decisions; executive compensation; generalized propensity score; principal–agent problem; China;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • M12 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation

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