澳洲dissertation網提供澳大利亞悉尼新南威爾士大學MBAdissertation。Research in International Business and Finance 21 (2007) 32–49
Corporate governance or globalization: What determines CEO compensation in China?
Donghui Li, Fariborz Moshirian, Pascal Nguyen∗, Liwen Tan
School of Banking & Finance, University of New South Wales, NSW 2052, Sydney, Australia
Received 1 March 2005; received in revised form 16 November 2005; accepted 15 December 2005
Available online 19 January 2006
Abstract
This paper examines the relationship between corporate governance and CEO compensation in China.
In contrast to results derived from U.S. data, we find little evidence that Chinese CEOs take advantage ofweaker board structures or less demanding shareholders to extract higher compensation packages. Instead,our results lend support to the view that the increasingly global managerial labor market and compensationstandards have a greater impact on CEO pay level. Our study suggests that CEOs in developing economieslike China, in our case, benefit more from their degree of exposure to these changes than from corporategovernance imperfections.

Keywords: CEO compensation; Corporate governance; Labor market; Globalization; China

1. Introduction
Over the past two decades, China has experienced a dramatic transformation from a command
economy to a society responsive to market forces. Groves et al. (1994, 1995) emphasize thatcorporate reforms initiated in the 1980s have handed plant managers autonomy in decisionmaking,reduced state interference in the production process, and significantly improved themanagerial resource allocation system. Many state-owned enterprises have been transferred tothe private sector, although the state and other government institutions have typically retainedindicate that corporate governance falls short of explaining differences in CEO compensation. In
contrast, variables that reflect a closer adherence of the firm to global executive pay standards (inaddition to corporate governance standards) all have significant coefficients. The results suggestthat powerful trends in executive compensation have more impact than corporate governancedifferences.
Murphy (1999) observes that two forceful transformations are currently under way. The firstis the acceptance of a greater dispersion in worker’ compensation. Hall and Liebman (1998)show that, between 1982 and 1994, the average compensation for U.S. CEOs increased by 175%
in real terms, whereas the average compensation for all U.S. workers barely increased (by only0.6% a year). Conyon et al. (1995) document that CEO compensation in the UK also increasedby 149% between 1980 and 1993. For the larger FTSE 100 companies, the increase is evenmore impressive (about 336%). There is no doubt that similar changes are taking place all overthe world and, specifically, in China, given the increasingly global market for managerial talent(Murphy, 1999; Business Week, 2001). Koen (2004) argues that these adjustments are necessaryfor a country affected by globalization to preserve its core characteristics. The second trendis the higher sensitivity of CEO compensation to firm performance. While Jensen and Murphy(1990) and Rosen (1992) found CEO compensation to be weakly associated with performance andvalue creation, the more comprehensive and recent study of Hall and Liebman (1998) shows that#p#分頁標題#e#
differences in CEO compensation are now essentially generated by stock performance following
the widespread introduction of stock options plans in U.S. firms. Again, this trend is perceptiblein many other countries. For example, Japanese firms have recognized the need to link the payand performance of senior executives, who can now receive stock options after legal restrictionswere lifted in 1997. In the case of China, Groves et al. (1994, 1995) indicate that plant managercareers and compensations are more effectively linked to firm performance. Managers can evenlose the security deposit they are required to put up at the time they are appointed should theymiss their stated performance objectives.
澳洲dissertation網提供澳大利亞悉尼新南威爾士大學MBAdissertation。Our results suggest that the degree of exposure to globalization is more significant for CEOcompensation than differences in corporate governance. In fact, Chinese managers do not appearto take advantage of weak governance structures to misappropriate corporate resources throughhigher compensation. The tidal changes in executive pay seem to offer better prospects for achievinghigher compensation in the long run. In addition, the potential threat of being charged forcorruption by the Chinese authorities may have considerably restrained the appropriation of corporate
resources.3
The rest of the paper is organized as follows. Section 2 presents and discusses the conceptual andempirical association between CEO compensation