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Justifying top management pay in a transitional economy

  • Firth, Michael
  • Leung, Tak Yan
  • Rui, Oliver M.

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.

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Article provided by Elsevier in its journal Journal of Empirical Finance.

Volume (Year): 17 (2010)
Issue (Month): 5 (December)
Pages: 852-866

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Handle: RePEc:eee:empfin:v:17:y:2010:i:5:p:852-866
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