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Managerial power theory, tournament theory, and executive pay in China

Chen, Jing, Ezzamel, Mahmoud ORCID: and Cai, Ziming 2011. Managerial power theory, tournament theory, and executive pay in China. Journal of Corporate Finance 17 (4) , pp. 1176-1199.

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In this paper, we test two models of executive pay that have not received much attention in research on Chinese listed companies: managerial power theory and tournament theory. We find that structural power (executive share ownership) and prestige power (executive education) are significantly positively related to executive remuneration, and political power (Executive/Party Secretary duality) positively and weakly related to executive remuneration. We also find that executive directors' organization level (as reflected in executive pay level for each of the three highest paid executives) is positively related to executive remuneration and the relationship is convex, and negatively related to the interaction between executive directors' organization level and government ownership. Tournament prize (executive pay) is not related to the number of contestants in the tournament and is negatively related to the interaction term between number of contestants and government ownership. Finally, earnings per share (EPS) as a measure of firm performance is positively related to the pay gap between contestants and negatively related to the interaction term between pay gap and government ownership. We explore the implications of these findings for reforming corporate governance in China.

Item Type: Article
Date Type: Publication
Status: Published
Schools: Business (Including Economics)
Subjects: H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management
Uncontrolled Keywords: Managerial power theory; Tournament theory; Executive pay; Organization levels
Publisher: Elsevier
ISSN: 0929-1199
Last Modified: 25 Oct 2022 08:26

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