Open AccessMixed Ownership Structures and Firm Performance in China Listed Firms
Author(s) -
Xiaolou Yang
Publication year - 2017
Publication title -
international journal of financial research
Language(s) - English
Resource type - Journals
eISSN - 1923-4031
pISSN - 1923-4023
DOI - 10.5430/ijfr.v8n4p80
Subject(s) - business , shareholder , china , state ownership , compensation (psychology) , executive compensation , principal–agent problem , order (exchange) , accounting , government (linguistics) , agency (philosophy) , industrial organization , market economy , emerging markets , finance , corporate governance , economics , psychology , linguistics , philosophy , epistemology , political science , psychoanalysis , law
China has achieved impressive economic growth since market reforms. The design of appropriate compensation structures is imperative so as to incentivize top managers, but little research has been done to examine the top management compensation structure in China. This study investigates how listed firms in China relate executive compensation to their firm performance and how such relationships are influenced by firm ownership structure. The results provide evidence showing strong link between compensation and performance varies across firms with different ownership structure. Private ownership enhances the link between firm performance and top CEOs compensation, while government ownership weakens executive pay-performance relation and thus makes the firms less effective in solving the agency problem between shareholders and management. It suggests enterprise reform in China will need to be supplemented by change in ownership structure in order to ensure fully success by transforming its State Owned Enterprises (SOEs) to corporations in the direction of converting state shares to public shares.