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Lu, Jiaqi (2020) CEO Cash Pay and Firm Performance in China under the Reformation of State-Owned Enterprise. [Dissertation (University of Nottingham only)]

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Abstract

The agency problem between managers and owners has been the subject of widespread academic contestation for many years. Within the research areas of European and American markets, scholars have concluded that a positive, causal relationship exists between pay and performance evaluation; thus, this indicates that equity incentives are well developed and theoretically validated. With regards to China – a country whereby governmental organisations have a controlling position and pay incentives are underdeveloped – the question arises as to whether the relationship between Chief Executive Officer (CEO) pay and corporate performance equally justifies the effectiveness of pay incentives in helping to alleviate the aforementioned principle-agent issue.

Since 2014, China has been initiating a process of SOE reform, which contains a series of actions to regulate the equity incentives and reduce cash pay, besides, implement mixed ownership in SOEs. In order to investigate the relationship between CEO pay and firm performance more precise under the current situation, this paper uses the fixed effect model to and difference-in-difference method to test about the relationship between CEO pay and firm performance and the effect of policy, furthermore, add the CEO pay into the difference-in-difference model to study how CEO pay affect firm performance under the policy implementation. This paper selects all data between 2010-2020 of A-share market, 31,708 initial observations were obtained in total.

The results of fixed effect model depict a significant positive relationship between CEO compensation and corporate performance. SOE reform policy has a significant boosting effect on firm performance, while, under the policy, CEO pay have no significant moderating effect on firm performance, which indicates reconciling incentives and constraints in the reform of the executive compensation system is regarded as a predicament in China. Although the pay restriction order effectively restricts the level of SOE executives' pay, it also reduces the incentive effect of pay, which results in reduced effort by SOE executives. This subsequently increases the relatively hidden agency cost of executive negativity.

Item Type:	Dissertation (University of Nottingham only)
Depositing User:	Lu, Jiaqi
Date Deposited:	25 Apr 2023 12:04
Last Modified:	25 Apr 2023 12:04
URI:	https://eprints.nottingham.ac.uk/id/eprint/66679

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