Title

Managerial power, compensation gap and firm performance - Evidence from Chinese public listed companies

Document Type

Article

Date of Original Version

6-24-2009

Abstract

We study the relationship between compensation gap and firm performance in the Chinese market. Extant studies have shown that, for the publicly traded companies in China, compensation gap between senior executives plays a tournament role and motivates managers to achieve higher level of performance. Ordinary least squares (OLS) regression results confirm the above result. However, simultaneous regression results indicate that the tournament effect is more significant in firms with high managerial powers. Our finding suggests that previous findings using OLS might be incomplete. We also show that firms with better performance and greater managerial power tend to have greater compensation gap. Meanwhile, the relationship between managerial power and firm performance is, on average, negative. © 2009 Elsevier Inc.

Publication Title

Global Finance Journal

Volume

20

Issue

2

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