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Digital technology, managerial power, and executive compensation: Evidence from China

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  • Kong, Dongmin
  • Lin, Zhiyang
  • Zhang, Yifan

Abstract

Digital technology is reshaping production while introducing a new form of information asymmetry, creating challenges for corporate governance. Using a patent-based measure of firm-level digital technology development, we examine listed firms in China and find that executives receive higher compensation in firms developing digital technologies. This effect is stronger when CEOs have more power and boards lack technical expertise, suggesting that digital development increases managerial influence over pay-setting and that complexity-driven information asymmetry undermines board oversight. We further find that executives benefit more when firms adopt development patterns that introduce greater information asymmetry. Analysis of the Made in China 2025 initiative reveals that alignment with policy priorities is linked to higher executive pay, indicating that policy alignment can serve as an additional source of managerial power. These findings support the managerial power theory and underscore the need for professional corporate governance to protect shareholder interests during rapid technological transformation.

Suggested Citation

  • Kong, Dongmin & Lin, Zhiyang & Zhang, Yifan, 2026. "Digital technology, managerial power, and executive compensation: Evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 99(C).
    • Handle: RePEc:eee:pacfin:v:99:y:2026:i:c:s0927538x26001575
    DOI: 10.1016/j.pacfin.2026.103211
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