Mini-Review on the Relationship between Cash Compensation of Senior Executives and Bank Performance in China

Aihua Shi; Jiaolong He; Mengyuan Chen

doi:10.54691/bcpbm.v19i.742

Authors

Aihua Shi
Jiaolong He
Mengyuan Chen

DOI:

https://doi.org/10.54691/bcpbm.v19i.742

Keywords:

Cash Compensation, Senior Executives, Bank Performance, Managerial Discretion

Abstract

Employee compensation is the reward that reflects its value in providing services to the enterprise, including monetary compensation and non-monetary compensation. Monetary compensation refers to the economic income measured in currency obtained by employees by completing the work in their own positions, while non-monetary benefits are those that cannot be measured in currency, such as the distribution of self-produced products and provision of benefits such as health care services. Therefore, remuneration is a measure and manifestation of the value that employees bring to the company for their services. In this paper, reviews on the relationship between cash compensation of senior executives and bank performance are conducted from the aspects of definition of compensation requirement and bank performance, worldwide theoretical reviews, and empirical reviews. Based on the analysis of relationship between compensation and bank performance as well as managerial discretion and pay-performance sensitivity in different literatures, the laggings in China’s studies are discussed in the end.

Downloads

Download data is not yet available.

References

Abascal, R., & González, F. (2019). Shareholder protection and bank executive compensation after the global financial crisis. Journal of Financial Stability, 40, 15-37.

Arun, T. G., & Turner, J. D. (2004). Corporate governance of banks in developing economies: Concepts and issues. Corporate Governance: An International Review, 12(3), 371-377.

Al-Musalli, M. A. K., & Ismail, K. N. I. K. (2012). Corporate governance, bank specific characteristics, banking industry characteristics, and intellectual capital (IC) performance of banks in arab gulf cooperation council (GCC) countries. Asian Academy of Management Journal of Accounting & Finance, 8.

Bae, K. H., Gong, Z., & Tong, W. (2020). Restricting CEO Pay Backfires: Evidence from China. European Corporate Governance Institute–Finance Working Paper, (670).

Bennett, R. L., Güntay, L., & Unal, H. (2015). Inside debt, bank default risk, and performance during the crisis. Journal of Financial Intermediation, 24(4), 487-513.

Boyd, B. K., & Salamin, A. (2001). Strategic reward systems: A contingency model of pay system design. Strategic management journal, 22(8), 777-792.

Cao, J., Lemmon, M. L., Pan, X., & Tian, G. G. (2009, November). Political promotion, CEO compensation and their effect on firm performance. In AFA 2011 Denver Meetings Paper.

Cherrington, D.J. (1989). Organizational behavior: The management of individual and organizational performance. Allyn & Bacon.

Cihak, M., Demirgüç-Kunt, A., Pería, M. S. M., & Mohseni-Cheraghlou, A. (2012). Bank regulation and supervision around the world: a crisis update. The World Bank.

Conyon, M. J., & He, L. (2011). Executive compensation and corporate governance in China. Journal of Corporate Finance, 17(4), 1158-1175.

Crawford, A. J., Ezzell, J. R., & Miles, J. A. (1995). Bank CEO pay-performance relations and the effects of deregulation. Journal of Business, 231-256.

De Andres, P., & Vallelado, E. (2008). Corporate governance in banking: The role of the board of directors. Journal of banking & finance, 32(12), 2570-2580.

Dell'Ariccia, G. (2001). Asymmetric information and the structure of the banking industry. European Economic Review, 45(10), 1957-1980.

Deng, H. (2009). Banking Supervision and Its Regulations—Comparative Study between US and China.

Dittmann, I., Maug, E., & Zhang, D. (2011). Restricting CEO pay. Journal of Corporate Finance, 17(4), 1200-1220.

Dhole, S., Khumawala, S. B., Mishra, S., & Ranasinghe, T. (2015). Executive compensation and regulation-imposed governance: Evidence from the California Nonprofit Integrity Act of 2004. The Accounting Review, 90(2), 443-466.

Drucker, P. F. (1995). People and performance: The best of Peter Drucker on management. Routledge.

Edmans, A., & Liu, Q. (2011). Inside debt. Review of finance, 15(1), 75-102.

Eisenhardt, K. M. (1989). Agency theory: An assessment and review. Academy of management review, 14(1), 57-74.

Fama, E. F. (1980). Agency problems and the theory of the firm. Journal of political economy, 88(2), 288-307.

Fama, E. F., & Jensen, M. C. (1983). Separation of ownership and control. The journal of law and Economics, 26(2), 301-325.

Finkelstein, S., & Boyd, B. K. (1998). How much does the CEO matter? The role of managerial discretion in the setting of CEO compensation. Academy of Management journal, 41(2), 179-199.

Firth, M., Fung, P. M., & Rui, O. M. (2006). Corporate performance and CEO compensation in China. Journal of Corporate Finance, 12(4), 693-714.

Fahlenbrach, R., & Stulz, R. M. (2011). Bank CEO incentives and the credit crisis. Journal of financial economics, 99(1), 11-26.

Gabčanová, I. (2012). Human resources key performance indicators. Journal of competitiveness.

Gomez-Mejia, L. R., Tosi, H., & Hinkin, T. (1987). Managerial control, performance, and executive compensation. Academy of Management journal, 30(1), 51-70.

Hambrick, D. C., & Abrahamson, E. (1995). Assessing managerial discretion across industries: A multimethod approach. Academy of Management Journal, 38(5), 1427-1441.

Hambrick, D. C., & Finkelstein, S. (1987). Managerial discretion: A bridge between polar views of organizational outcomes. Research in organizational behavior.

Harvey, M. (1993). Designing a global compensation system: The logic and a model. The Columbia Journal of World Business, 28(4), 56-72.

Hopt, K. J. (2013). Corporate governance of banks and other financial institutions after the financial crisis. Journal of Corporate Law Studies, 13(2), 219-253.

Houston J F, James C. CEO Compensation and Bank Risk: Is Compensation in Banking Structured to Promote Risk Taking? [J]. Journal of Monetary Economics, 1995, 36(2): 405-431.

John, K., De Masi, S., & Paci, A. (2016). Corporate governance in banks. Corporate Governance: An International Review, 24(3), 303-321.

Jensen, M. C., & Meckling, W. H. (1976). Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure. Journal of Financial Economics, 3(4), 305-360.

Jensen, M. C., & Murphy, K. J. (1990). Performance pay and top-management incentives. Journal of political economy, 98(2), 225-264.

Jing, R., Huang, X., & Wang, Z. (2014). Assessing managerial discretion across different industries in China. Frontiers of Business Research in China, 8(1), 98-112.

Jing, R., Wan, Y., & Gao, X. (2010). Managerial discretion and executives' compensation. Journal of Chinese Human Resources Management.

Kato, T., & Long, C. (2006). Executive compensation, firm performance, and corporate governance in China: Evidence from firms listed in the Shanghai and Shenzhen Stock Exchanges. Economic development and Cultural change, 54(4), 945-983.

Kothari, C. R. (2004). Research methodology: Methods and techniques. New Age International.

Key, S. (2002). Perceived managerial discretion: An analysis of individual ethical intentions. Journal of managerial issues, 218-233.

Kaplan, R.S. & Norton, P.D. (1992). The balanced scorecard: Measures that drive performance. Harvard Business Review. 70(1): (pp.71-79).

Kleymenova, A., & Tuna, A. (2018). Regulation of Compensation and Systemic Risk: Evidence from the UK. Chicago Booth Research Paper, (16-07).

Lebans, M. & Euske, K. (2006). A conceptual and operational delineation of performance. Business Performance Measurement. Cambridge University Press

Li, J., & Tang, Y. I. (2010). CEO hubris and firm risk taking in China: The moderating role of managerial discretion. Academy of Management Journal, 53(1), 45-68.

Liang, L., & Song, Q. (2020). The impact of financial enterprise executive compensation under the salary limit order on operating performance. Financial Economics, (3), 26-34.

Magnan, M. L., & St‐onge, S. (1997). Bank performance and executive compensation: A managerial discretion perspective. Strategic Management Journal, 18(7), 573-581.

Miller, D., Kets de Vries, M. F., & Toulouse, J. M. (1982). Top executive locus of control and its relationship to strategy-making, structure, and environment. Academy of Management journal, 25(2), 237-253.

Mueller, D. C., & Yun, S. L. (1997). Managerial discretion and managerial compensation. International Journal of Industrial Organization, 15(4), 441-454.

Mullineux, A. (2006). The corporate governance of banks. Journal of Financial Regulation and Compliance.

Neuberger, D. (1998). Industrial organization of banking: A review. International Journal of the Economics of Business, 5(1), 97-118.

Omoregie, O. K., & Kelikume, I. (2017). Executive compensation and banking sector performance: evidence from Nigeria. The Journal of Developing Areas, 51(2), 1-15.

Patten, M. L., & Newhart, M. (2017). Understanding research methods: An overview of the essentials. Taylor & Francis.

Robbins, S.P. (1987). Organizational Theory: Structure, Design, and Application. San Diego: Prentice-Hall.

Sorauren, I. F. (2000). Non-monetary incentives: Do people work only for money?. Business Ethics Quarterly, 925-944.

Schneider, B., Hanges, P. J., Smith, D. B., & Salvaggio, A. N. (2003). Which comes first: employee attitudes or organizational financial and market performance? Journal of applied psychology, 88(5), 836.

Shen, Y., L, P. (2010). Research on the relationship between government salary limit orders and state-owned enterprise executive compensation, performance and luck [J]. China Industrial Economics, 2010(11): 130-139.

Sukamolson, S. (2007). Fundamentals of quantitative research. Language Institute Chulalongkorn University, 1, 2-3.

Sundaram, R. K., & Yermack, D. L. (2007). Pay me later: Inside debt and its role in managerial compensation. The Journal of Finance, 62(4), 1551-1588.

Tung, F., & Wang, X. (2012). Bank CEOs, inside debt compensation, and the global financial crisis. Boston Univ. School of Law Working Paper, (11-49).

Thanassoulis, J. (2012). The case for intervening in bankers’ pay. The Journal of Finance, 67(3), 849-895.

Tian, N., Zhang, Z. (2015). Will the "salary limit order" work? -A theoretical analysis based on the perspective of incomplete contracts [J]. Management Review, 2015,27(04):122-131.

Vanderstoep, S. W., & Johnson, D. D. (2008). Research methods for everyday life: Blending qualitative and quantitative approaches (Vol. 32). John Wiley & Sons.

Woodridge, J. (2006). Introductory econometrics. 3rd. Mason, Ohio: Thomson Higher Education, 199.

Wangrow, D. B., Schepker, D. J., & Barker III, V. L. (2015). Managerial discretion: An empirical review and focus on future research directions. Journal of Management, 41(1), 99-135.

Wright, P., & Kroll, M. (2002). Executive discretion and corporate performance as determinants of CEO compensation, contingent on external monitoring activities. Journal of Management and Governance, 6(3), 189-214.

Xia, G., Runtian, J., & Yuanyuan, W. (2012). Empirical Study on Managerial Discretion, CEO Compensation and Firm Performance. Management Review, 4.

Yang, Q., Wang, Y., Tang, Y. (2018). The policy effect of the “salary limit order”: an evaluation based on competition and monopolistic market response of central enterprises [J]. Financial Research, 2018(01):156-173.

Zhang. C. (2015). The remuneration system of state-owned enterprise executives in competitive industries should adhere to the principle of marketization. Political Economics Review, 6(1), 141. (In Chinese)

Zhang, C., & Xie, J. (2008, November). Empirical study on effect of managerial discretion on ceo pay-performance sensitivity. In 2008 International Conference on Risk Management & Engineering Management (pp. 616-621). IEEE.