Document Type

Journal article

Source Publication

Journal of Empirical Finance

Publication Date

12-1-2010

Volume

17

Issue

5

First Page

852

Last Page

866

Keywords

Executive pay; Relative compensation; Performance sensitivities and elasticities; Perquisites; China

Abstract

We investigate some aspects of top management pay in China's listed firms. We find positive pay and performance sensitivities and elasticities for top executives. In terms of magnitude, these sensitivities are similar to those reported in U.S. firms during the 1970s. However, the pay and performance relation is slightly weaker for firms located in less developed provinces. We also find that the pay disparities between top managers and employees are positively related to a firm's performance. Thus, it appears that any deviation away from a manager-worker compensation norm has to be justified by superior firm performance. In additional analyses, we find that managers' perquisites are not related to performance.

DOI

10.1016/j.jempfin.2010.06.002

Print ISSN

09275398

Publisher Statement

Copyright © 2010 Elsevier B.V. All rights reserved.

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Full-text Version

Accepted Author Manuscript

Recommended Citation

Firth, M., Leung, T. Y., & Rui, O. M. (2010). Justifying top management pay in a transitional economy. Journal of Empirical Finance, 17(5), 852-866. doi: 10.1016/j.jempfin.2010.06.002