Corporate governance in China: CEO compensation, company performance and ultimate ownership

Abstract

This dissertation contributes to the international literature by examining the relation between chief executive officer (CEO) compensation and firm performance in China, especially under different types of ultimate shareholders, who have differing motivations and objectives regarding the structure of CEO compensation. I use unbalanced panel data from more than 1,300 Chinese A-share listed companies over 2005-2009 and find that performance, especially one of market-based measurement, has a significant impact on CEO compensation. CEO compensation levels have risen in recent years due to economic gains rather than poor corporate governance. Firms that operate under other central government ministries (SOECG) than those of the ultimate shareholder do not use performance as a guideline for CEO pay, although they have the highest CEO compensation level amongst all five groups. The size of the board directors and independent directors are contributes positively to CEO compensation. While the degree of ownership concentration and size of supervision board are negative related to CEO compensation. Moreover, CEO gets higher pay if independent direct especially financial one working province is same as companies headquarter. Most of these results are consistent with my hypothesis. Shareholders, managers, government, and others who must make improvements in China’s corporate governance standards should find these results useful. In addition, the findings can offer future research directions.