Common ownership and executive pay-for-performance sensitivity: Evidence from China

Tianli Xu, Longbing Xu and Siyuan Zhu

Research in International Business and Finance, 2023, vol. 65, issue C

Abstract: This study focuses on the impact of common ownership on executive pay-for-performance sensitivity using a sample of A-share listed firms in China from 2008 to 2020. We find common ownership significantly improves executive pay-for-performance sensitivity and plays a monitoring and governance role. Meanwhile, the impact of common ownership on executive pay-for-performance sensitivity is more significant in non-state-owned firms (non-SOEs) and when a firm faces a highly competitive product market. The mechanism tests indicate that common ownership affects executive pay-for-performance sensitivity through the information and governance mechanisms. Further analyses show that the portion of compensation explained by common ownership significantly enhances future firm performance. Overall, our findings validate the positive role of common ownership in corporate governance.

Keywords: Common ownership; Pay-for-performance sensitivity; Institutional investors; Monitoring; Governance (search for similar items in EconPapers)
JEL-codes: G14 G2 G34 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:65:y:2023:i:c:s0275531923000739

DOI: 10.1016/j.ribaf.2023.101947

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