Justifying top management pay in a transitional economy

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

Research output: Journal PublicationsJournal Article (refereed)peer-review

45 Citations (Scopus)


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
Issue number5
Publication statusPublished - 1 Dec 2010


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

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