corporate governance or globalization what determines ceo.pdfVIP

Research in International Business and Finance 21 (2007) 32–49 Corporate governance or globalization: What determines CEO compensation in China? Donghui Li, Fariborz Moshirian, Pascal Nguyen ∗, Liwen Tan School of Banking Finance, University of New South Wales, NSW 2052, Sydney, Australia Received 1 March 2005; received in revised form 16 November 2005; accepted 15 December 2005 Available online 19 January 2006 Abstract This paper examines the relationship between corporate governance and CEO compensation in China. In contrast to results derived from U.S. data, we find little evidence that Chinese CEOs take advantage of weaker board structures or less demanding shareholders to extract higher compensation packages. Instead, our results lend support to the view that the increasingly global managerial labor market and compensation standards have a greater impact on CEO pay level. Our study suggests that CEOs in developing economies like China, in our case, benefit more from their degree of exposure to these changes than from corporate governance imperfections. © 2005 Elsevier B.V. All rights reserved. JEL classification: G30 Keywords: CEO compensation; Corporate governance; Labor market; Globalization; China 1. Introduction Over the past two decades, China has experienced a dramatic transformation from a command economy to a society responsive to market forces. Groves et al. (1994, 1995) emphasize that corporate reforms initiated in the 1980s have handed plant managers autonomy in decision- making, reduced state interference in the production process, and significantly improved the managerial resource allocation system. Many state-owned enterprises have been transferred to the private sector, although the state and other government institutions have typically retained ∗ Corresponding a