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Hong Kong stock listing and the sensitivity of managerial compensation to firm performance in state-controlled Chinese firms

Author

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  • Bin Ke

    (Nanyang Technological University)

  • Oliver Rui

    (China–Europe International Business School)

  • Wei Yu

    (Shanghai Institute of Foreign Trade)

Abstract

We compare the sensitivity of managerial cash compensation to firm performance, the level of long term managerial incentives, and the sensitivity of CEO turnover to firm performance for three types of state-controlled Chinese firms: A shares (firms incorporated and listed in mainland China), H shares (firms incorporated in mainland China but listed in Hong Kong), and Red Chip shares (firms incorporated outside mainland China and listed in Hong Kong). We find no difference in the three pay-for-performance sensitivity measures between H shares and A shares. The cash pay-for-performance sensitivity and the level of long-term managerial incentives are higher for Red Chip shares than for the other two firm types. However, the sensitivity of CEO turnover to firm performance is insignificant for all three firm types. Our study illustrates the complexity in the influence of mainland China’s versus Hong Kong’s institutional forces on state-controlled Chinese firms listed in Hong Kong.

Suggested Citation

  • Bin Ke & Oliver Rui & Wei Yu, 2012. "Hong Kong stock listing and the sensitivity of managerial compensation to firm performance in state-controlled Chinese firms," Review of Accounting Studies, Springer, vol. 17(1), pages 166-188, March.
    • Handle: RePEc:spr:reaccs:v:17:y:2012:i:1:d:10.1007_s11142-011-9169-0
    DOI: 10.1007/s11142-011-9169-0
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    Keywords

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    JEL classification:

    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law
    • N25 - Economic History - - Financial Markets and Institutions - - - Asia including Middle East
    • N45 - Economic History - - Government, War, Law, International Relations, and Regulation - - - Asia including Middle East

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