CEO Compensation, Expropriation, and the Balance of Power among Large Shareholders

Yongli Luo and Dave O. Jackson

A chapter in Advances in Financial Economics, 2012, pp 195-238 from Emerald Group Publishing Limited

Abstract: Purpose – This study explores the probability of expropriation of minority shareholders by controlling shareholders in the form of CEO compensation under an imperfect governance institution by using a novel Chinese dataset over 2001–2010. Design/methodology/approach – We use a direct method to gauge controlling shareholders’ tunneling and expropriation of minority shareholders, and we present a simple model to link corporate governance and the degree of entrenchment by the largest shareholder. We use both Logit and Probit models to predict the likelihood of tunneling and use two-stage least square (2SLS) regression to address the endogeneity issues. Findings – There are significant deterioration effects between controlling shareholder's tunneling and firm performance. Firms with more tunneling activities typically have larger controlling ownership, greater evidence of state control, less balance of power among large shareholders, and weaker board characteristics. Research limitations/implications – The positive relationship between controlling shareholders’ tunneling and executive compensation implies that the controlling shareholder might divert personal benefits from the public firms at the expense of minority shareholders. Originality/value – We focus on the effects of corporate governance restructuring on executive compensation and controlling shareholders’ tunneling in the Chinese context, and we also investigate whether these effects are stronger with the involvement of state ownership. We empirically address the issues between executive compensation and expropriation of minority shareholders.

Keywords: Executive compensation; corporate governance; tunneling; minority shareholder (search for similar items in EconPapers)
Date: 2012
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (text/html)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (application/pdf)
https://www.emerald.com/insight/content/doi/10.110 ... 3732(2012)0000015010
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eme:afeczz:s1569-3732(2012)0000015010

DOI: 10.1108/S1569-3732(2012)0000015010

Access Statistics for this chapter

More chapters in Advances in Financial Economics from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().