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Informativeness of performance measures and Chinese executive compensation

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<mark>Journal publication date</mark>12/2013
<mark>Journal</mark>Asia Pacific Journal of Management
Issue number4
Volume30
Number of pages28
Pages (from-to)1031-1058
Publication statusPublished
Early online date28/04/13
Original languageEnglish

Abstract

We provide evidence on the use of accounting versus stock market performance measures as determinants of Chinese top managers’ compensation over 2001–2007. We theorize and find that (1) accounting returns are weighted more heavily in general than stock returns in determining top executive compensation, (2) state-owned enterprises (SOEs) rely significantly less on stock market returns than do non-SOEs, (3) firms located in high marketization regions rely more heavily on stock market returns to reward managers, and (4) firms with better internal governance quality rely more on stock returns to reward executives. We discuss our findings with particular reference to the Chinese context of our research.