Final published version
Research output: Contribution to Journal/Magazine › Journal article › peer-review
Research output: Contribution to Journal/Magazine › Journal article › peer-review
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TY - JOUR
T1 - Chinese executive compensation
T2 - the role of asymmetric performance benchmarks
AU - Cordeiro, James
AU - He, Lerong
AU - Conyon, Martin James
AU - Shankar Shaw, Tara
PY - 2016
Y1 - 2016
N2 - We study asymmetric performance benchmarking in Chinese executive compensation contracts between 2000 and 2010. We predict that while relative performance evaluation criteria are important in executive pay contracts, managerial power and influence will result in a decoupling between pay and performance. We predict that Chinese managers are rewarded for superior performance but not penalized for inferior performance. We test this asymmetric pay-for-performance hypothesis using three performance benchmarks: whether firm performance is positive/negative, above/below industry average, and above/below regional average. We find the sensitivity between executive compensation and firm accounting performance is asymmetric. It is significantly stronger when firm accounting performance is positive or firm performance exceeds industry or regional median benchmarks compared to cases when firm accounting performance is negative or is below industry or regional median benchmarks. We find little evidence that ownership structure and internal governance mechanisms moderate the asymmetric pay-for-performance relationship.
AB - We study asymmetric performance benchmarking in Chinese executive compensation contracts between 2000 and 2010. We predict that while relative performance evaluation criteria are important in executive pay contracts, managerial power and influence will result in a decoupling between pay and performance. We predict that Chinese managers are rewarded for superior performance but not penalized for inferior performance. We test this asymmetric pay-for-performance hypothesis using three performance benchmarks: whether firm performance is positive/negative, above/below industry average, and above/below regional average. We find the sensitivity between executive compensation and firm accounting performance is asymmetric. It is significantly stronger when firm accounting performance is positive or firm performance exceeds industry or regional median benchmarks compared to cases when firm accounting performance is negative or is below industry or regional median benchmarks. We find little evidence that ownership structure and internal governance mechanisms moderate the asymmetric pay-for-performance relationship.
KW - executive compensation
KW - corporate governance
KW - benchmarking
KW - pay for performance
KW - China
U2 - 10.1080/1351847X.2013.769892
DO - 10.1080/1351847X.2013.769892
M3 - Journal article
VL - 22
SP - 484
EP - 505
JO - European Journal of Finance
JF - European Journal of Finance
SN - 1351-847X
IS - 4-6
ER -