英语论文网

s plans in U.S. firms. Again, this trend is perceptiblein many other countries. For example, Japanese firms have recognized the need to link the payand performance of senior executives, who can now receive stock options after legal restrictions
were lifted in 1997. In the case of China, Groves et al. (1994, 1995) indicate that plant managercareers and compensations are more effectively linked to firm performance. Managers can even
lose the security deposit they are required to put up at the time they are appointed should they
miss their stated performance objectives.
Our results suggest that the degree of exposure to globalization is more significant for CEO
compensation than differences in corporate governance. In fact, Chinese managers do not appear
to take advantage of weak governance structures to misappropriate corporate resources throughhigher compensation. The tidal changes in executive pay seem to offer better prospects for achievinghigher compensation in the long run. In addition, the potential threat of being charged forcorruption by the Chinese authorities may have considerably restrained the appropriation of corporateresources.3
The rest of the paper is organized as follows. Section 2 presents and discusses the conceptual andempirical association between CEO compensation and corporate governance structures. Section
3 describes the data and the sample’s characteristics. Section 4 contains the empirical results.Section 5 provides concluding remarks.
2. Model and hypotheses
In this section, we review and discuss the corporate governance variables involved in CEO
compensation. A first set of variables is related to the board’s composition; a second set describes
the firm’s ownership structure. The influence of independent variables is assessed from the agency
3 Corporate governance regulations recently introduced have increased management obligations to report all major
transactions, making more difficult to tunnel valuable assets out from the firm’s control.
D. Li et al. / Research in International Business and Finance 21 (2007) 32–49 35
cost perspective and, when applicable, from the perspective of converging managerial labor markets.
As in comparable studies, control variables include CEO and firm characteristics.
2.1. Board structure variables
CEO duality indicates that the CEO is also Chairman of the board. The influential Cadbury
Report (1992) recognizes that CEO duality undermines the firm’s governance standards. Jensen
(1993) argues that personal interests seriously impair the CEO’s faculty to carry out some of
the Chairman’s duties, such as evaluating and compensating key executives. In other words,
duality puts the CEO in a position of evaluating his own performance.4 Moreover, Ryan and
Wiggins (2001) suggest that duality can give the CEO excessive influence over the board; hence
compromising the latter’s ability to exert proper control over the firm’s compensation policy. As
a result, CEOs may be less constrained to extract higher compensation. Core et al. (1999) provide
empirical evidence that CEO duality is associated with significantly higher CEO compensation.
The reasoning naturally applies to the case of Chinese firms.
Board size is known to unfavorably affect the board’s ability to discipline the CEO; in particular
prevent excessive CEO compensation. Lipton and Lorsch (1992), Jensen (1993) and Yermack
(1996) call attenti