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How does independent directors’ reputation influence pay‐for‐performance? Evidence from China

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  • HaiYan Yang
  • Daifei (Troy) Yao
  • Xin Qu

Abstract

We examine the impact of independent directors’ reputations on executive pay‐performance sensitivity. Using hand‐collected data from listed Chinese companies from 2012 to 2017, we find a positive association between independent directors’ reputations and pay‐performance sensitivity that is more pronounced in companies with less concentrated ownership. Further, the results show that reputable directors have a stronger influence on pay‐performance sensitivity when they sit on a remuneration committee, are in state‐owned enterprises, and are in companies with higher agency costs. Our results highlight the monitoring role of reputable independent directors in setting effective executive compensation contracts.

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  • HaiYan Yang & Daifei (Troy) Yao & Xin Qu, 2022. "How does independent directors’ reputation influence pay‐for‐performance? Evidence from China," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 62(1), pages 959-1007, March.
    • Handle: RePEc:bla:acctfi:v:62:y:2022:i:1:p:959-1007
    DOI: 10.1111/acfi.12815
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