EXECUTIVE COMPENSATION STICKINESS AND PEER GROUP BENCHMARKS: EVIDENCE FROM CHINESE FIRMS

Zhiqiang Lu, Sarath Abeysekera and Hongyu Li

The International Journal of Business and Finance Research, 2015, vol. 9, issue 5, 25-36

Abstract: This paper examines the phenomenon and effect of peer group on executive compensation stickiness in China's listed firms. We find there has been substantial growth in executive compensation in the past 10 years. Consistent with agency theory, executive compensation is positively related to firm performance. However, pay-for-performance sensitivity is asymmetric, and it is lower when firm performance declines suggesting that there is a characteristic of executive compensation stickiness in Chinese firms. Further, we test the effect of peer group on compensation stickiness. We find that the characteristic of compensation stickiness only exists in the firms whose executive compensation is lower than the compensation of peer group. The evidence suggests that compensation stickiness is an important mechanism to provide retention incentives to firm managers, rather than an agency problem in Chinese firms

Keywords: Corporate Governance; Pay-For-Performance Sensitivity; Peer Group; Compensation Stickiness (search for similar items in EconPapers)
JEL-codes: G34 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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