IDEAS home Printed from https://ideas.repec.org/p/mos/moswps/2014-51.html
   My bibliography  Save this paper

Relative Earnings and Firm Performance: Evidence from Publicly-listed Firms in China, 2005-2012

Author

Listed:
  • Peiwen Bai
  • Wenli Cheng

Abstract

This paper studies the relationship between three measures of relative earnings and firm performance based on data of 664 listed manufacturing companies in China over the period 2005-2012. It finds that (1) capital earnings relative to labor earnings and the overall average wage level relative to a firm’s average wage level had negative effects on firm performance; (2) the earnings of high-level managers relative to ordinary workers had a positive impact on firm performance; and (3) the effects of relative earnings on firm performance differed across regions, industry characteristics, and firm ownership structures, and over different time periods.

Suggested Citation

  • Peiwen Bai & Wenli Cheng, 2014. "Relative Earnings and Firm Performance: Evidence from Publicly-listed Firms in China, 2005-2012," Monash Economics Working Papers 51-14, Monash University, Department of Economics.
  • Handle: RePEc:mos:moswps:2014-51
    as

    Download full text from publisher

    File URL: http://www.buseco.monash.edu.au/eco/research/papers/2014/5114relativeearningsbaicheng.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Lazear, Edward P & Rosen, Sherwin, 1981. "Rank-Order Tournaments as Optimum Labor Contracts," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 841-864, October.
    2. Christian Grund & Niels Westergaard-Nielsen, 2008. "The Dispersion of Employees' Wage Increases and Firm Performance," ILR Review, Cornell University, ILR School, vol. 61(4), pages 485-501, July.
    3. George A. Akerlof & Janet L. Yellen, 1990. "The Fair Wage-Effort Hypothesis and Unemployment," The Quarterly Journal of Economics, Oxford University Press, vol. 105(2), pages 255-283.
    4. Benoît Mahy & François Rycx & Mélanie Volral, 2011. "Wage Dispersion and Firm Productivity in Different Working Environments," British Journal of Industrial Relations, London School of Economics, vol. 49(3), pages 460-485, September.
    5. Fredrik Heyman, 2005. "Pay inequality and firm performance: evidence from matched employer-employee data," Applied Economics, Taylor & Francis Journals, vol. 37(11), pages 1313-1327.
    6. Baker, George P & Jensen, Michael C & Murphy, Kevin J, 1988. " Compensation and Incentives: Practice vs. Theory," Journal of Finance, American Finance Association, vol. 43(3), pages 593-616, July.
    7. Young, Andrew T., 2010. "One of the things we know that ain't so: Is US labor's share relatively stable?," Journal of Macroeconomics, Elsevier, vol. 32(1), pages 90-102, March.
    8. Raff, Daniel M G & Summers, Lawrence H, 1987. "Did Henry Ford Pay Efficiency Wages?," Journal of Labor Economics, University of Chicago Press, vol. 5(4), pages 57-86, October.
    9. Levine, David I, 1992. "Can Wage Increases Pay for Themselves? Tests with a Production Function," Economic Journal, Royal Economic Society, vol. 102(414), pages 1102-1115, September.
    10. Smith, Adam, 1776. "An Inquiry into the Nature and Causes of the Wealth of Nations," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, number smith1776.
    11. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
    12. Salop, Steven C, 1979. "A Model of the Natural Rate of Unemployment," American Economic Review, American Economic Association, vol. 69(1), pages 117-125, March.
    13. Summers, Lawrence H, 1988. "Relative Wages, Efficiency Wages, and Keynesian Unemployment," American Economic Review, American Economic Association, vol. 78(2), pages 383-388, May.
    14. Martin J. Conyon & Simon I. Peck & Graham V. Sadler, 2001. "Corporate tournaments and executive compensation: Evidence from the U.K," Strategic Management Journal, Wiley Blackwell, vol. 22(8), pages 805-815, August.
    15. Carmichael, H Lorne, 1990. "Efficiency Wage Models of Unemployment--One View," Economic Inquiry, Western Economic Association International, vol. 28(2), pages 269-295, April.
    16. Lang, Kevin & Kahn, Shulamit, 1990. "Efficiency Wage Models of Unemployment: A Second View," Economic Inquiry, Western Economic Association International, vol. 28(2), pages 296-306, April.
    17. George A. Akerlof, 1982. "Labor Contracts as Partial Gift Exchange," The Quarterly Journal of Economics, Oxford University Press, vol. 97(4), pages 543-569.
    18. Peter Cappelli & Keith Chauvin, 1991. "An Interplant Test of the Efficiency Wage Hypothesis," The Quarterly Journal of Economics, Oxford University Press, vol. 106(3), pages 769-787.
    19. Eriksson, Tor, 1999. "Executive Compensation and Tournament Theory: Empirical Tests on Danish Data," Journal of Labor Economics, University of Chicago Press, vol. 17(2), pages 262-280, April.
    20. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-444, June.
    21. Weiss, Andrew W, 1980. "Job Queues and Layoffs in Labor Markets with Flexible Wages," Journal of Political Economy, University of Chicago Press, vol. 88(3), pages 526-538, June.
    22. BAI, Chong-En & QIAN, Zhenjie, 2010. "The factor income distribution in China: 1978-2007," China Economic Review, Elsevier, vol. 21(4), pages 650-670, December.
    23. Zhang, Jun & Liu, Xiaofeng, 2013. "The evolving pattern of the wage–labor productivity nexus in China: Evidence from manufacturing firm-level data," Economic Systems, Elsevier, vol. 37(3), pages 354-368.
    24. Baglioni, Angelo & Colombo, Luca, 2011. "The effects of imperfect auditing on managerial compensation," International Review of Economics & Finance, Elsevier, vol. 20(4), pages 542-548, October.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    relative income share of capital and labor; relative earnings of management and workers; relative wage; firm performance in China;

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:mos:moswps:2014-51. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Simon Angus). General contact details of provider: http://edirc.repec.org/data/dxmonau.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.