The Impact Of Corporate Governance On Managerial Compensation In Chinese Listed Firms

Both scholars and practitioners all aired their opinions about effectiveness of the corporate governance system in China. One of the most important respects of the corporate governance is if the managers are paid based on their performance. In order to investigate the effectiveness of corporate governance system, his paper investigates the role of corporate governance system in structuring managerial compensation.Based on data from annual report of companies listed in Shenzhen or Shanghai in 2004, this paper investigate the effectiveness of internal corporate governance system both in forming managerial compensation and in raising pay and performance sensitivity.In managerial compensation level model, the paper finds out that the board size and the percentage of outside board are not related to managerial compensation, which casts doubt on the effectiveness of the board mechanism. Furthermore, the paper also finds out that state-owned share are not related with lower pay, it is due to the pay raise in resent years in listed state-owned enterprises. Finally the paper finds there is negative relationship between managerial compensation and stock concentration.In pay and performance sensitivity model, the paper finds out that state ownership raise the pay and performance sensitivity, whereas the stock concentration does not.