Justifying top management pay in a transitional economy

Michael Arthur FIRTH, Tak Yan LEUNG, Oliver M. RUI

Research output: Journal PublicationsJournal Article (refereed)

30 Citations (Scopus)

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.
Original languageEnglish
Pages (from-to)852-866
Number of pages15
JournalJournal of Empirical Finance
Volume17
Issue number5
DOIs
Publication statusPublished - 1 Dec 2010

Fingerprint

Managers
Transitional economies
Top management
Firm performance
Elasticity
Employees
Deviation
Workers' compensation
China

Keywords

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

Cite this

FIRTH, Michael Arthur ; LEUNG, Tak Yan ; RUI, Oliver M. / Justifying top management pay in a transitional economy. In: Journal of Empirical Finance. 2010 ; Vol. 17, No. 5. pp. 852-866.
@article{2cd6330adc2f4c5c89b4640dbfb4d980,
title = "Justifying top management pay in a transitional economy",
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.",
keywords = "Executive pay; Relative compensation; Performance sensitivities and elasticities; Perquisites; China",
author = "FIRTH, {Michael Arthur} and LEUNG, {Tak Yan} and RUI, {Oliver M.}",
year = "2010",
month = "12",
day = "1",
doi = "10.1016/j.jempfin.2010.06.002",
language = "English",
volume = "17",
pages = "852--866",
journal = "Journal of Empirical Finance",
issn = "0927-5398",
publisher = "Elsevier",
number = "5",

}

Justifying top management pay in a transitional economy. / FIRTH, Michael Arthur; LEUNG, Tak Yan; RUI, Oliver M.

In: Journal of Empirical Finance, Vol. 17, No. 5, 01.12.2010, p. 852-866.

Research output: Journal PublicationsJournal Article (refereed)

TY - JOUR

T1 - Justifying top management pay in a transitional economy

AU - FIRTH, Michael Arthur

AU - LEUNG, Tak Yan

AU - RUI, Oliver M.

PY - 2010/12/1

Y1 - 2010/12/1

N2 - 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.

AB - 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.

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

UR - http://commons.ln.edu.hk/sw_master/1634

U2 - 10.1016/j.jempfin.2010.06.002

DO - 10.1016/j.jempfin.2010.06.002

M3 - Journal Article (refereed)

VL - 17

SP - 852

EP - 866

JO - Journal of Empirical Finance

JF - Journal of Empirical Finance

SN - 0927-5398

IS - 5

ER -