Corporate governance or globalization: What determines CEO compensation in China
- D. Li, F. Moshirian, P. Nguyen, L. Tan
- Research in International Business and Finance,
We investigate the determinants of pay for Chinese executives. We extend the optimal contracting model by incorporating the managerial power hypothesis and the behavioural approach. Our findings show that CEO duality and CEO shareholding tend to entrench insider managers more to collude with government officials to extract firm’s assets. The escalated global executive compensation standards provide attractive benchmarks for Chinese firms in setting their executive pay. The behaviour of Chinese compensation committees in deciding executive pay is highly influenced by the global pay benchmarks of peers, rather than by the Chinese authorities’ expectation of controlling excessive managerial compensation.