The Influence of Remuneration Committee over Pay-Performance Sensitivity in China

This paper examines the role and function of Remuneration Committee in improving pay-performance sensitivity (PPS) in emerging markets. We conduct an exploratory analysis of the influence of remuneration committee on the PPS using proxy disclosures by a diverse sample of 9,616 firm-year observations. The PPS was compared before and after introduction of the remuneration committees. and statistical difference was observed. Listed companies with remuneration committees are associated with stronger incentives. When considering the factors that explain duration differences in the selection of remuneration committees, we find that companies with more ownership held by the largest shareholder or less sale revenues are more likely to form remuneration committees earlier. And the duration is shorter when the companies are State-owned enterprises (SOE). All of the coefficients are statistically significant even with industry and year controls.