Do all CEO pay regulations hurt firm performance? Evidence from China

IF 1.8 Q2 BUSINESS, FINANCE International Journal of Managerial Finance Pub Date : 2023-10-03 DOI:10.1108/ijmf-09-2021-0458

Xiaochuan Tong, Weijie Wang, Yaowu Liu

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Abstract

Purpose The authors study and compare the effects of three CEO compensation restricting policies issued by the Chinese government in 2009, 2012 and 2015. This paper aims to shed light on the conditions under which CEO compenstation can be effectively regulated without negatively affecting firm performance. Design/methodology/approach These policies targeted state-owned enterprises (SOEs), especially central state-owned enterprises (CSOEs). Using these policies as natural experiments, the authors investigate how their effects differ on CEO compensation, firm performance and two known performance-decreasing mechanisms: perk consumption and tunneling activities. Findings The authors show that restricting CEO pay does not necessarily backfire in terms of deteriorating firm performance. This non-decreasing firm performance can be achieved by restricting perk consumption and tunneling activities while introducing CEO pay regulations. Originality/value The authors exploit a powerful experimental setting in the context of China. The evidence contributes to the literature on CEO pay regulations and is relevant to the managerial decisions of policy makers and boards of directors.

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所有的CEO薪酬法规都会损害公司业绩吗?来自中国的证据

目的研究并比较2009年、2012年和2015年中国政府出台的三次CEO薪酬限制政策的效果。本文旨在阐明CEO薪酬在不对公司绩效产生负面影响的情况下能够得到有效监管的条件。这些政策的目标是国有企业，特别是中央国有企业。作者利用这些政策作为自然实验，研究了它们对CEO薪酬、公司绩效以及两种已知的绩效下降机制(福利消费和隧道活动)的影响。研究结果表明，就公司业绩恶化而言，限制CEO薪酬并不一定会适得其反。这种不下降的企业绩效可以通过限制福利消费和隧道活动来实现，同时引入CEO薪酬法规。原创性/价值作者利用了中国背景下强有力的实验环境。这些证据有助于研究CEO薪酬法规的文献，并与决策者和董事会的管理决策相关。

本文章由计算机程序翻译，如有差异，请以英文原文为准。

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来源期刊

International Journal of Managerial Finance BUSINESS, FINANCE-

CiteScore

4.10

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0.00%

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期刊介绍： Treasury and Financial Risk Management ■Redefining, measuring and identifying new methods to manage risk for financing decisions ■The role, costs and benefits of insurance and hedging financing decisions ■The role of rating agencies in managerial decisions Investment and Financing Decision Making ■The uses and applications of forecasting to examine financing decisions measurement and comparisons of various financing options ■The public versus private financing decision ■The decision of where to be publicly traded - including comparisons of market structures and exchanges ■Short term versus long term portfolio management - choice of securities (debt vs equity, convertible vs non-convertible)