The CEO Labour Market in China's Public Listed Companies
AbstractUsing panel data for all of China's public listed firms over the period 2001-2010 we examine how firms have recruited and rewarded their executives over a decade of huge growth and turbulence. CEO pay is sensitive to firm performance, although the elasticities are lower than for the United States and Europe, especially with respect to returns on assets (ROA). CEO pay rises with firm size and growth, with elasticities resembling those for the United States. We find no dramatic response to the stock market crash of 2007/08. The elasticity of pay to stock returns falls to zero after the crash, while elasticities with respect to sales and ROA remain significant. Executive cash compensation rose steeply throughout the period - in contrast to the United States. There are steep gradients in executive compensation within firms, consistent with tournament prizes, and around two-thirds of CEO appointments are internal promotions. Within-firm executive compensation rose at a faster rate than executive compensation across firms, helping to explain why CEO turnover rates declined a little over the decade. Turnover rates did not spike with the stock market crash. Privatisation and reforms to corporate governance contributed to growth in executive compensation. A picture emerges of an executive labour market in which firms are linking pay to performance and relying on incentive structures within firms to foster executive talent.
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Bibliographic InfoPaper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp1148.
Date of creation: Jun 2012
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Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP
executive compensation; CEOs; corporate governance; tournaments; firm-specific human capital; China;
Find related papers by JEL classification:
- G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
- J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
- J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
- M12 - Business Administration and Business Economics; Marketing; Accounting - - Business Administration - - - Personnel Management; Executive Compensation
- M52 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects
- O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
- P31 - Economic Systems - - Socialist Institutions and Their Transitions - - - Socialist Enterprises and Their Transitions
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-06-25 (All new papers)
- NEP-BEC-2012-06-25 (Business Economics)
- NEP-HRM-2012-06-25 (Human Capital & Human Resource Management)
- NEP-LAB-2012-06-25 (Labour Economics)
- NEP-TRA-2012-06-25 (Transition Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Giulia Faggio & Kjell Salvanes & John Van Reenen, 2007.
"The Evolution of Inequality in Productivity and Wages: Panel Data Evidence,"
NBER Working Papers
13351, National Bureau of Economic Research, Inc.
- Giulia Faggio & Kjell G. Salvanes & John Van Reenen, 2010. "The evolution of inequality in productivity and wages: panel data evidence," Industrial and Corporate Change, Oxford University Press, vol. 19(6), pages 1919-1951, December.
- Giulia Faggio & Kjell Salvanes & John Van Reenen, 2007. "The Evolution of Inequality in Productivity and Wages: Panel Data Evidence," CEP Discussion Papers dp0821, Centre for Economic Performance, LSE.
- Alex Bryson & John Forth & Minghai Zhou, 2013. "CEO Incentive Contracts in China: Why Does City Location Matter?," CEP Discussion Papers dp1192, Centre for Economic Performance, LSE.
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