Corporate governance, product market competition and managerial incentives: Evidence from four Pacific Basin countries

Hin cheung Annie Ko, Jamie Tong, Feida (Frank) Zhang, Guojian Zheng

Research output: Contribution to journalArticle

11 Citations (Scopus)

Abstract

This paper examines how firm-level governance mechanisms affect the role of competition in influencing managerial incentives. Specifically, we examine how concentrated ownership structures affect the positive association between competition and pay-performance sensitivity. Using samples from four Pacific Basin markets, namely, China, Hong Kong, Singapore, and Taiwan, from 2001 to 2012, we found that competition leads to strong pay-performance sensitivity for widely-held firms, but not for family- or state-controlled firms. This result suggests that the governance role of industry competition is weakened when firms are controlled by family or the state. Our study deepens our understanding on how product market competition shapes managerial incentives and offers insights to policy makers who are interested in enhancing the effectiveness of industry-level corporate governance in shaping managerial incentives.

Original languageEnglish
Pages (from-to)491-502
Number of pages12
JournalPacific Basin Finance Journal
Volume40
DOIs
Publication statusPublished - 1 Dec 2016

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