Corporate governance, product market competition and managerial incentives: Evidence from four Pacific Basin countries

Hin-cheung Annie Ko, Tong, Yixing (Jamie), Zhang, Feida (Frank) and Guojian Zheng

Pacific-Basin Finance Journal, 2016, vol. 40, issue PB, 491-502

Abstract: This paper examines how firm-level governance mechanisms affect the role of competition in influencing managerial incentives. Specifically, we examine how concentrated ownership structures affect the positive association between competition and pay-performance sensitivity. Using samples from four Pacific Basin markets, namely, China, Hong Kong, Singapore, and Taiwan, from 2001 to 2012, we found that competition leads to strong pay-performance sensitivity for widely-held firms, but not for family- or state-controlled firms. This result suggests that the governance role of industry competition is weakened when firms are controlled by family or the state. Our study deepens our understanding on how product market competition shapes managerial incentives and offers insights to policy makers who are interested in enhancing the effectiveness of industry-level corporate governance in shaping managerial incentives.

Keywords: Product market competition; Managerial incentives; Ownership structure (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (16)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:40:y:2016:i:pb:p:491-502

DOI: 10.1016/j.pacfin.2016.10.009

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