Research Handbook on Executive Pay
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Research Handbook on Executive Pay

Edited by Randall S. Thomas and Jennifer G. Hill

Research on executive compensation has exploded in recent years, and this volume of specially commissioned essays brings the reader up-to-date on all of the latest developments in the field. Leading corporate governance scholars from a range of countries set out their views on four main areas of executive compensation: the history and theory of executive compensation, the structure of executive pay, corporate governance and executive compensation, and international perspectives on executive pay.
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Chapter 20: Executive Compensation and Pay for Performance in China

Martin J. Conyon and Lerong He


1 Martin J. Conyon and Lerong He 1 INTRODUCTION We investigate executive compensation in China, the world’s second largest economy. Relative to Western economies, empirical studies on CEO pay in China are scarce. From the 1990s Chinese firms began the transition process from state owned enterprises (SOEs) to modern enterprises. China has two stock exchanges, the Shanghai and Shenzhen Stock Exchanges. The Shanghai Stock Exchange (SSE) started operation in December, 2000. By the end of December 2009, there were 888 listed companies and a market capitalization of 18,465 billion RMB (or about US$2,715 billion). The Shenzhen Stock Exchange was founded in December, 2001. By the end of December 2009, a total of 830 firms were listed with a market capitalization of 5,928 billion RMB (or about US$872 billion). From an executive pay perspective, there are several important questions to address. Are Chinese executives paid in the same way as Western executives? Are the drivers of executive pay, such as firm performance and size, as important in socialist China as in the West? How does the Chinese state affect the provision of incentives in Chinese firms? To answer these and related questions we review the evidence amassed in the recent extant literature. In addition, we provide some further evidence on the determinants of executive pay in Chinese listed firms. The institutional context of China is radically different from Western economies. China is a socialist economy and the state continues to play a dominant role in economic...

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