Abstract
| Original language | English |
|---|---|
| Pages (from-to) | 637-656 |
| Number of pages | 20 |
| Journal | The European Journal of Finance |
| Volume | 20 |
| Issue number | 7-9 |
| Early online date | 8 Aug 2012 |
| DOIs | |
| Publication status | Published - 2014 |
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Bibliographical note
Special Issue: FIRST CHINESE CAPITAL MARKETS CONFERENCEThe authors gratefully acknowledge the helpful comments and suggestions of Edward Lee (our discussant), two anonymous reviewers, and participants at the Durham University and European Journal of Finance joint conference on the Chinese Capital Market. The authors also thank Jin Gao, Ping Lin, Aristotelis Stouraitis, Sonia Wong, and seminar participants at Lingnan University and the Hong Kong Institute of Business Studies for helpful comments on earlier versions of the paper. Simon Lo and Lili Wang provided excellent research assistance. Zhang gratefully acknowledges the financial support from the Research Committee of Lingnan University (Grant No. DB10A2).
Keywords
- compensation
- probability of informed trading
Cite this
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Information-based stock trading and managerial incentives : evidence from China's stock market. / FIRTH, Michael ; JIN, Man; ZHANG, Yuanyuan.
In: The European Journal of Finance, Vol. 20, No. 7-9, 2014, p. 637-656.Research output: Journal Publications › Journal Article (refereed)
TY - JOUR
T1 - Information-based stock trading and managerial incentives : evidence from China's stock market
AU - FIRTH, Michael
AU - JIN, Man
AU - ZHANG, Yuanyuan
N1 - Special Issue: FIRST CHINESE CAPITAL MARKETS CONFERENCE The authors gratefully acknowledge the helpful comments and suggestions of Edward Lee (our discussant), two anonymous reviewers, and participants at the Durham University and European Journal of Finance joint conference on the Chinese Capital Market. The authors also thank Jin Gao, Ping Lin, Aristotelis Stouraitis, Sonia Wong, and seminar participants at Lingnan University and the Hong Kong Institute of Business Studies for helpful comments on earlier versions of the paper. Simon Lo and Lili Wang provided excellent research assistance. Zhang gratefully acknowledges the financial support from the Research Committee of Lingnan University (Grant No. DB10A2).
PY - 2014
Y1 - 2014
N2 - This paper uses stock price informativeness, or information-based stock trading, to help explain the pay–performance sensitivity (PPS) of chief executive officer (CEO) compensation in China's listed firms. We argue that higher stock price informativeness, which we measure by the probability of informed trading, helps and encourages shareholders to incentivize the top management team based on stock market performance. The regression results support our argument and show that a higher level of stock price informativeness is associated with higher CEO PPSs. Moreover, the impact of stock price informativeness on CEO incentives is stronger for privately controlled listed firms than it is for state-controlled listed firms. The results also hold when information asymmetry is approximated by the accuracy and dispersion of the earnings forecasts made by financial analysts.
AB - This paper uses stock price informativeness, or information-based stock trading, to help explain the pay–performance sensitivity (PPS) of chief executive officer (CEO) compensation in China's listed firms. We argue that higher stock price informativeness, which we measure by the probability of informed trading, helps and encourages shareholders to incentivize the top management team based on stock market performance. The regression results support our argument and show that a higher level of stock price informativeness is associated with higher CEO PPSs. Moreover, the impact of stock price informativeness on CEO incentives is stronger for privately controlled listed firms than it is for state-controlled listed firms. The results also hold when information asymmetry is approximated by the accuracy and dispersion of the earnings forecasts made by financial analysts.
KW - compensation
KW - probability of informed trading
UR - http://commons.ln.edu.hk/sw_master/524
UR - https://www.scopus.com/inward/record.uri?eid=2-s2.0-84903692000&doi=10.1080%2f1351847X.2012.672441&partnerID=40&md5=7ea7376e116f421246e6f3c4d5e40822
U2 - 10.1080/1351847X.2012.672441
DO - 10.1080/1351847X.2012.672441
M3 - Journal Article (refereed)
VL - 20
SP - 637
EP - 656
JO - European Journal of Finance
JF - European Journal of Finance
SN - 1351-847X
IS - 7-9
ER -