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Government intervention and executive compensation contracts of state-owned enterprises: empirical evidence from China

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  • Ningyue Liu
  • Liming Wang
  • Min Zhang
  • Wen Zhang
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    Abstract

    This paper attempts to examine the impact of government intervention on executive compensation contracts by employing the data of listed companies in the Chinese equity market. The results show that redundancy burden caused by government intervention significantly reduces the compensation-performance sensitivity of executives in state-owned enterprises (SOEs), increases the level of compensation stickiness and leads to more executive perks. However, there is no evidence to support this conclusion in non-SOEs. Our results indicate that government has great responsibility for redundancy in SOEs and has a significant impact on the design of executive compensation contracts, but has limited impact on that of non-SOEs. Therefore, the impact of redundancy burden on executive compensation contracts is different between SOEs and non-SOEs. Our findings have important implications for the relationship between property rights and corporate performance, the formation mechanism of redundancy, and the impact of redundancy burden on executive compensation contracts.

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    File URL: http://hdl.handle.net/10.1080/14765284.2012.724983
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    Bibliographic Info

    Article provided by Taylor & Francis Journals in its journal Journal of Chinese Economic and Business Studies.

    Volume (Year): 10 (2012)
    Issue (Month): 4 (August)
    Pages: 391-411

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    Handle: RePEc:taf:jocebs:v:10:y:2012:i:4:p:391-411

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