Executive Compensation, Firm Performance, and Corporate Governance in China

Executive Compensation, Firm Performance, and Corporate Governance in China

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Unformatted text preview: IZA DP No. 1767 Executive Compensation, Firm Performance, and Corporate Governance in China: Evidence from Firms Listed in the Shanghai and Shenzhen Stock Exchanges Takao Kato Cheryl Long DISCUSSION PAPER SERIES Forschungsinstitut zur Zukunft der Arbeit Institute for the Study of Labor September 2005 Executive Compensation, Firm Performance, and Corporate Governance in China: Evidence from Firms Listed in the Shanghai and Shenzhen Stock Exchanges Takao Kato Colgate University, Columbia University and IZA Bonn Cheryl Long Colgate University, Stanford University and University of Electronic Science and Technology of China Discussion Paper No. 1767 September 2005 IZA P.O. Box 7240 53072 Bonn Germany Phone: +49-228-3894-0 Fax: +49-228-3894-180 Email: iza@iza.org This paper can be downloaded without charge at: http://ssrn.com/abstract=555794 An index to IZA Discussion Papers is located at: http://www.iza.org/publications/dps/ Any opinions expressed here are those of the author(s) and not those of the institute. Research disseminated by IZA may include views on policy, but the institute itself takes no institutional policy positions. The Institute for the Study of Labor (IZA) in Bonn is a local and virtual international research center and a place of communication between science, politics and business. IZA is an independent nonprofit company supported by Deutsche Post World Net. The center is associated with the University of Bonn and offers a stimulating research environment through its research networks, research support, and visitors and doctoral programs. IZA engages in (i) original and internationally competitive research in all fields of labor economics, (ii) development of policy concepts, and (iii) dissemination of research results and concepts to the interested public. IZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be available directly from the author. IZA Discussion Paper No. 1767 September 2005 ABSTRACT Executive Compensation, Firm Performance, and Corporate Governance in China: Evidence from Firms Listed in the Shanghai and Shenzhen Stock Exchanges This paper provides evidence on how executive compensation relates to firm performance in listed firms in China. Using comprehensive financial and accounting data on Chinas listed firms from 1998 to 2002, augmented by unique data on executive compensation and ownership structure, we find for the first time statistically significant sensitivities and elasticities of annual cash compensation (salary and bonus) for top executives with respect to shareholder value in China. In addition, sales growth is shown to be significantly linked to executive compensation and that Chinese executives are penalized for making negative profit although they are neither penalized for declining profit nor rewarded for rising profit insofar as it is positive. Perhaps more importantly, we find that ownership structure of Chinas insofar as it is positive....
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This note was uploaded on 04/22/2009 for the course ACT 540 taught by Professor Schwartz during the Spring '09 term at Binghamton University.

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Executive Compensation, Firm Performance, and Corporate Governance in China

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