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http://hdl.handle.net/10397/109272
| Title: | Restricting CEO pay backfires : evidence from China | Authors: | Bae, KH Gong, Z Tong, WHS |
Issue Date: | May-2024 | Source: | Journal of business finance and accounting, May-June 2024, v. 51, no. 5-6, p. 1015-1045 | Abstract: | Using the pay restriction imposed on CEOs of centrally administered state-owned enterprises (CSOEs) in China in 2009, we study the effects of limiting CEO pay. Compared with CEOs of firms not subject to the restriction, the CEOs of CSOEs experienced a significant pay cut. In response to the pay cut, CEOs increased the consumption of perks and siphoned off firm resources for their own benefit. Pay-performance sensitivity for these firms also significantly decreases. The performance of these firms dropped following the pay restriction. Our findings suggest that restricting CEO pay distorts CEO incentives and brings unintended consequences. Our findings caution against limiting CEO pay. | Keywords: | CEO compensation restriction Pay-performance sensitivity Perk consumption State-owned enterprises Tunneling |
Publisher: | Wiley-Blackwell Publishing Ltd. | Journal: | Journal of business finance and accounting | ISSN: | 0306-686X | EISSN: | 1468-5957 | DOI: | 10.1111/jbfa.12741 | Rights: | © 2023 The Authors. Journal of Business Finance & Accounting published by John Wiley & Sons Ltd. This is an open access article under the terms of the Creative Commons Attribution-NonCommercial-NoDerivs License (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permitsuse and distribution in any medium, provided the original work is properly cited, the use is non-commercial and no modifications oradaptations are made. The following publication Bae, K.-H., Gong, Z. J., & Tong, W. H. S. (2024). Restricting CEO pay backfires: Evidence from China. Journal of Business Finance & Accounting, 51, 1015–1045 is available at https://doi.org/10.1111/jbfa.12741. |
| Appears in Collections: | Journal/Magazine Article |
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