The Political Determinants of Executive Compensation: Evidence from an Emerging Economy

40 Pages Posted: 16 Nov 2020

See all articles by Hao Liang

Hao Liang

Singapore Management University - Lee Kong Chian School of Business; European Corporate Governance Institute (ECGI)

Luc Renneboog

Tilburg University - Department of Finance; European Corporate Governance Institute (ECGI); Tilburg Law and Economics Center (TILEC)

Sunny Li Sun

University of Massachusetts Lowell

Date Written: April 20, 2015

Abstract

In regulated economies, corporate governance mechanisms such as executive compensation are less driven by market-based forces but more subject to political influence. We study the political determinants of executive compensation for all listed Chinese firms in the context of an exogenous shock that removed market frictions in share-tradability. Under strong political constraints, state ownership reduced the managerial pay levels and increased pay-for-performance sensitivity (to asset-based benchmarks). Board independence and compensation committees do not curb managerial pay, and market-based factors do not have a significant influence. However, these effects reversed following the governance shock (removal of market frictions in share tradability).

Keywords: Executive compensation, political economy, state ownership, market friction

JEL Classification: G34, H70, M12, P26, P31

Suggested Citation

Liang, Hao and Renneboog, Luc and Sun, Sunny Li, The Political Determinants of Executive Compensation: Evidence from an Emerging Economy (April 20, 2015). Emerging Markets Review, Vol. 25, 2015, 69-91, Available at SSRN: https://ssrn.com/abstract=3700620

Hao Liang (Contact Author)

Singapore Management University - Lee Kong Chian School of Business ( email )

469 Bukit Timah Road
Singapore 912409
Singapore

HOME PAGE: http://business.smu.edu.sg/faculty/profile/130396/LIANG-Hao

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Luc Renneboog

Tilburg University - Department of Finance ( email )

P.O. Box 90153
Warandelaan 2
5000 LE Tilburg
Netherlands
+13 31 466 8210 (Phone)
+13 31 466 2875 (Fax)

European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Tilburg Law and Economics Center (TILEC)

Warandelaan 2
Tilburg, 5000 LE
Netherlands

Sunny Li Sun

University of Massachusetts Lowell ( email )

72 University Ave.
Lowell, MA 01854
United States

HOME PAGE: http://https://scholar.google.com/citations?user=c-Covi4AAAAJ&hl

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
7
Abstract Views
86
PlumX Metrics