Most of the study on CEO compensation has examined how principal agency conflict would influence CEO compensation design in developed economies. In this study, I examined how principal-principal conflict would influence CEO compensation in emerging market. Drawing on social theory of agency, I categorized three types of CEOs that might represent different interest. I elaborated how blockholder rent appropriation would influence CEO pay to performance linkage and compensation based on different types of CEO. Using data from Chinse list firms from 2006-2014, I found support for the hypotheses. When the CEO is blockholder, blockholder rent appropriation does not influence CEO pay to performance linkage and compensation. When the CEO is blockholder affiliates, blockholder rent app...[ Read more ]

Most of the study on CEO compensation has examined how principal agency conflict would influence CEO compensation design in developed economies. In this study, I examined how principal-principal conflict would influence CEO compensation in emerging market. Drawing on social theory of agency, I categorized three types of CEOs that might represent different interest. I elaborated how blockholder rent appropriation would influence CEO pay to performance linkage and compensation based on different types of CEO. Using data from Chinse list firms from 2006-2014, I found support for the hypotheses. When the CEO is blockholder, blockholder rent appropriation does not influence CEO pay to performance linkage and compensation. When the CEO is blockholder affiliates, blockholder rent appropriation weaken the pay to performance linkage and has a negligible effect on compensation. When the CEO is professional, blockholder rent appropriation.has a negative effect on the pay to performance link and has a negative effect on compensation. For professional CEO in state controlled firm, the negative effect of blockholder rent appropriation on pay to performance link is weaker while the negative effect of blockholder rent appropriation on compensation is stronger.

Keywords: Agency theory; Principal-Principal conflict; rent appropriation; CEO compensation; emerging market