 Performance sensitivity of non-executive compensation in China: The role of economic policy uncertaintyWenyun Yao, Yadi Sang, Yongjian Shen and Pengfei Han Economic Modelling, 2020, vol. 93, issue C, 310-320 Abstract: This paper examines the impact of economic policy uncertainty on non-executive employees from the perspective of pay-performance sensitivity (PPS). Economy-wide uncertainty can trigger adverse impacts for businesses, and in response enterprises may adjust employee pay to maintain their level of activity. Using firm-level data on A-share companies listed on the Shanghai and Shenzhen Stock Exchanges during 2003–2016, this paper finds that better-performing firms pay higher wages on average, which they adjust only during uncertain times. We also show that the impact of economic policy uncertainty on PPS is more pronounced in the context of labor-intensive, highly competitive industries and state-owned enterprises, because they tend to respond to uncertainty via wage adjustment. The evidence demonstrates that the pay-performance link is much weaker during uncertain times, when different subgroups react differently. However, our finding of a robust pay-performance relation holds, even with a range of firm-level controls and accounting for different levels of firm heterogeneity. Keywords: Macroeconomic policy; Uncertainty; Non-executive employees; Pay-performance sensitivity (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:93:y:2020:i:c:p:310-320 DOI: 10.1016/j.econmod.2020.08.015 Access Statistics for this article Economic Modelling is currently edited by S. Hall and P. Pauly More articles in Economic Modelling from Elsevier |
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