آیا پرداخت پراکنش مدیر عامل شرکت در بازار نوظهور حائز اهمیت است ؟ مدارک و شواهد از شرکت های چینی

This paper examines how the institutional features of emerging economies (i.e., government ownership, political connections, and market reform) influence CEO pay-dispersion incentives. Consistent with our expectation, we find that CEO pay dispersion generally provides a tournament incentive in China's emerging market, as it is positively associated with firm performance. In addition, tournament incentives are weaker where firms are controlled by the government and where the CEO is politically connected, but it became stronger after the China's split-share structure reforms. Further, we find that in state controlled firms the satisfaction gained by meeting multiple economic and social goals largely reduces the effectiveness of tournament incentives, while the managerial agency problems inherent in private firms might mitigate them.

Executive pay dispersion, defined as the pay differential between the CEO and other executives, has implications for the inner workings of the top executive team, and for overall firm performance (Bebchuk et al., 2011). While many studies examine the level and structure of executive compensation and its relationship with performance (Jensen and Murphy, 1990, Yermack, 1996, Core et al., 1999 and Murphy, 1999), controversy remains about how executive pay differentials arise and affect firm performance (Kale et al., 2009, Bebchuk et al., 2011 and Chen et al., 2011a). Since the emergence of the global financial crisis, the media has been critical of the large gap in pay between CEOs and employees in most countries, and of the resulting severe agency problems and inequality. While many governments have tried to reduce the gap by restricting ever-higher CEO compensation,1 public anger and resentment of it have not ceased. The extant literature tends toward two views regarding the optimal (or appropriate) level of pay dispersion. The tournament viewpoint sees the pay differential in the corporate hierarchy as defining an arena where individuals compete for promotion and rewards. High-performing executives with considerable managerial potential win promotion and commensurate compensation. A large spread of compensation across corporate hierarchical levels attracts talented and venturesome participants to compete in the managerial tournament by providing extra incentives to exert effort. This viewpoint supports the view that a large pay dispersion is necessary to provide appropriate incentives for executives to perform ( Main et al., 1993, Eriksson, 1999 and Kale et al., 2009). 2 The entrenchment viewpoint sees the large pay gap between the CEO and other executives as giving an indication of CEO power ( Lambert et al., 1993), since powerful CEOs are entrenched and find it easier to expropriate shareholder wealth. Empirical studies show that the excess executive-pay gap might reflect agency problems and reduce firm value and performance ( Adams et al., 2005, Landier et al., 2008 and Bebchuk et al., 2011). Evidence from emerging markets such as China has only recently started to appear. J. Chen et al. (2011) document that managerial powers are positively related to executive remuneration, and organizational levels and contestant numbers have positive effects on pay differences between executives. They provide preliminary evidence that the pay gap has a positive effect on firm performance, and that this effect is stronger in firms that are relatively less controlled by the government. Lin and Lu (2009) also find that the pay gap is positively related to firm performance, and that this relationship is more significant with higher managerial power (defined as larger managerial ownership and longer tenure of the CEO). Although the evidence for pay dispersion's positive effect on performance has been established, there is no comprehensive analysis showing how it affects firm performance and by what mechanism. This paper extends the existing literature by examining the channels through which the institutional features of emerging markets shape executive pay dispersion, and how they affect tournament incentives in China's listed firms. Specifically, it identifies the institutional features that can affect pay dispersion and the relationship between pay dispersion and firm performance, including state ownership, CEO political connections and reform of the split-share structure. Moreover, in contrast to Lin and Lu (2009), this paper follows Bebchuk et al. (2011) in treating managerial power as an entrenchment, and investigates its impact on the association between pay dispersion and firm performance. The institutional background of China's listed firms encompasses several important features that shape executive pay dispersion, and which may differ from those in the U.S. and other countries. First, while CEO compensation has been increasingly important, and more related to firm's profits since China's economic reform of executive compensation (Groves et al., 1994, Kato and Long, 2005 and Firth et al., 2006a; Zheng et al., 2008 and Cao et al., 2011a), the executive pay dispersion remains constrained by the dominance of state ownership and government intervention. In addition to the goals of maximizing shareholders' value, the state owner (in other words, the government) also has non-economic goals of maintaining social equality and harmony. Due to these non-economic goals, the pay differential in the corporate hierarchy, especially in SOEs, would attract close political scrutiny because it is a potential point of conflict. Furthermore, the competition for completion of these non-economic goals does not necessarily lead to an improvement in performance (Jensen, 2001). Independent from the incentives provided by executive compensation, performance improvement in SOEs could be related to policy support obtained from the government. Secondly, an implicit incentive scheme such as perquisites, political promotion, chasing personal fame and other “grey” income on the position seems to be prevalent, but not directly observable, in China's emerging market (Chen et al., 2010 and Cao et al., 2011b). In such an economic environment, which lacks a functioning external labor market, the complexity of executive incentive casts doubts on the value of explicit monetary compensation. This study applies the notion of pay dispersion to such market conditions to understand executive incentive. In accordance with previous research (Kale et al., 2009 and Bebchuk et al., 2011), this study measured CEO pay dispersion by i) the pay gap between the CEO and other top executives (GAP), and ii) the ratio of CEO pay to the total compensation of the top five executives within the top management team (CPS). It shows that the mean pay gap is 250,868RMB (equivalent to 36,891USD), which is much lower than the 778,000USD reported by Kale et al. (2009), and the ratio of CEO pay to the aggregate compensation of the top five executives across our sample in China is 31.9%, which is around 3.9% lower than the figure found by Bebchuk et al. (2011) for U.S. firms. Moreover, pay dispersion in privately controlled firms is 30.1% larger than in SOEs, and the CPS is 6.5% higher. In private firms where CEOs are politically connected, the pay gap is 20% higher and the CPS is 10% higher than in those where the CEOS do not have such connections. Our empirical analysis find that pay dispersion is positively related to firm performance, which supports the tournament theory (Lazear and Rosen, 1981), and that the positive effect of CEO pay dispersion on firm performance is weaker in state-controlled firms and in firms where CEOs are politically connected. We further found in a subsample of SOEs that tournament incentives are weaker if firms seek for goals that are more political, such as the remittance of tax imposed by governments; in a subsample of private firms, tournament incentives become weaker if the CEO is also the owner who controls the firm. These findings suggest that the multiple goals of SOEs and agency problems in private firms will reduce tournament incentives. In addition, we found that a split-share structure reform strengthens the positive relationship between CEO pay dispersion and firm performance, although this amplification is weaker in SOEs and stronger in private firms. This was particularly so after the reform where CEO pay dispersion began to have a significant effect on stock-market performance when measured as stock return. These results remained robust when the endogeneity of pay dispersion was taken into consideration and alternative measures of pay dispersion and firm performance were applied. When we controlled for granting stock options and perks, our results still supported the main findings listed above. Overall, our findings suggest that institutional features such as state ownership, political connections and market reform play an important role in tournament incentives in China; these incentives in turn mitigate the agency problems between shareholders and managers because pay dispersion is appropriately aligned with the CEO's relative talents and contributions, and provide extra incentive to top executives. Our study contributes to the literature on executive compensation by first focusing on comparisons of the level of executive compensation (e.g., Kaplan, 1994, Abowd and Kaplan, 1999, Conyon and Murphy, 2000 and Kato and Long, 2005), and then by exploring the institutional background in which executive pay dispersion arises, and examining its different implications for firms in developed economies like the U.S. Second, we extend the extant literature on the theory of executive incentive. Prior studies have examined whether executive pay dispersion provides a tournament incentive (Lazear and Rosen, 1981, Conyon et al., 2001, Rajgopal and Srinivasan, 2006, Kale et al., 2009 and Bebchuk et al., 2011), but the evidence is mixed, because tournaments should depend on their economic value and cultural environments (Burns et al., 2012). Some researchers have found the executive pay gap to be positively associated with firm performance in China's firms (Lin and Lu, 2009 and Chen et al., 2011a), indicating that Chinese cultural values such as collectivism, and firm characteristics such as managerial power, have a substantial effect on tournament incentives. In addition to examining the effect of ownership types on executive pay dispersion, our study explores deeper reasons that shape tournament incentives in different types of firms, and examines other institutional features in China such as political connections and the influence of split-share structure reform in China. Third, we contribute to the emerging debate on the pay gap between CEOs and other employees since the 2007–2008 global financial crisis, and whether the pay gap should be regulated (Conyon et al., 2011, Fahlenbrach and Stulz, 2011, Core and Guay, 2010 and Garner and Kim, 2010). Questions about the appropriate level and structure of executive compensation as an incentive mechanism for better firm performance still exist, as does the question of whether tournament theory even holds as an explanation for the large CEO pay gap found in the U.S. and elsewhere. The effect of pay restrictions imposed by regulators might be traded off by limiting tournament incentives. The rest of the paper proceeds as follows: Section 2 describes the background and develops hypotheses; Section 3 provides a description of data and methodology; Section 4 discusses empirical results; Section 5 presents robustness tests; and Section 6 draws some conclusions from the findings.

The issue relating to the pay gap between CEOs and other executives in the top management team has recently received a considerable amount of attention. An appropriate pay scheme is essential to the success of SOE reform. Information about executive compensation in China's listed firms has been disclosed since 1998, and more completely since 2005. We have taken advantage of this information to investigate pay dispersion and its effect on firm performance in China's listed firms using a sample ranging from 2005 to 2010. Consistent with tournament theory and previous research (Kale et al., 2009 and Chen et al., 2011a), we find that pay dispersion is positively related to firm performance. We also find that the positive association between pay dispersion and firm performance is weaker in SOEs than in privately controlled firms, because SOEs are required to achieve multiple economic and social goals such as the remittance of tax to governments and alternative incentive schemes. Moreover, the relationship between pay dispersion and firm performance is weakened by CEOs' political connections, and we find that this less-positive effect is significant in private firms. We specifically find that the positive relationship between CEO pay dispersion and firm performance has been strengthened since the split-share structure reform, but the positive effect of this reform is weaker in SOEs than in private firms. Furthermore, we also find that a significantly positive effect of CEO pay dispersion on stock returns emerged after the split-share structure reform. We provide evidence that state ownership and political connection exert a value-destroying effect by weakening the positive effect of tournament incentives, while market reform improves economic efficiency by strengthening tournament incentives. We argue that in SOEs the satisfaction gained from multiple economic and social goals, such as the remittance of tax imposed by governments, has largely reduced the effectiveness of tournament incentives; moreover, in family-controlled firms where the CEO is also the family owner, the tournament theory does not hold at all. Overall, our results suggest that in an emerging market, a Chinese firm's institutional features, such as state ownership and political connections, play important roles in the effect of tournament incentives on motivating executives.