Business, Management and Accounting
4 years ago

Non-controlling shareholders boost CEO incentives, aligning interests for better performance.

Emerging Markets Finance and Trade
Does Non-controlling Large Shareholder Monitoring Improve CEO Incentives?
Zhiyang Hui, Hongyan Fang

Paper Summary

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Non-controlling large shareholders (NLSs) in Chinese firms positively impact CEO pay-performance sensitivity (PPS). NLSs' equity ownership or Shapley value aligns CEO and shareholder interests. This effect is stronger when monitoring benefits are higher. Different types of NLSs enhance CEO incentives through various channels. This study sheds light on how NLSs monitor CEOs in emerging markets.