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CEO Compensation and Corporate Governance in China


  • Martin J. Conyon,

  • Lerong He

Address for correspondence: Lerong He, School of Business Administration and Economics, College at Brockport, State University of New York, Brockport, NY 14420, USA. Tel: 585-3955781; E-mail:


Manuscript Type


Research Questions

This study investigates the determination of Chinese CEO pay. We focus on three related questions: (1) Is Chinese CEO pay related to firm performance? (2) Are CEO pay dynamics important? (3) Does corporate governance affect CEO pay and equity incentives in China?

Research Findings

Using data on CEO compensation in China's public traded firms from 2000 to 2010, we document significant changes in CEO pay, ownership and board structure. We document that CEO pay is positively correlated to both accounting and stock market performance, although the link to accounting performance is more robust. We find that CEO pay dynamics are important as pay in the current year is significantly positively correlated to CEO pay the previous year. We also find that CEO equity ownership and equity grants are influenced by board and ownership structure.

Theoretical/Academic Implications

This study supplements the standard agency theory approach to executive compensation with insights gained from the dynamics of wage setting theory developed in the labor economics field. It predicts that incomplete information and learning lead to adjustment costs and non-instantaneous changes in CEO pay.

Practitioner/Policy Implications

This study offers insights to policy makers interested in enhancing the design of executive compensation and internal corporate governance within transition economies.