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| Media Coverage and the Effectiveness of Executive Compensation Contracts |
| LUO Jinhui
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| School of Management, Xiamen University |
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Abstract Recently, the mass phenomenon of executive compensation in listed companies has drawn investors' and news media's intensive attention. Using a data set of 11,567 firm-year observations of Chinese A-share listed companies from 2003 to 2011, this study examines the impact of media coverage on the effectiveness of executive compensation contracts, and further explores potential differences of this impact in firms with different nature of property rights and located in regions with different institutional environment. The results show that (1) there is a positive and significant relationship between media coverage and executive pay-performance sensitivity, indicating that media coverage may increase the effectiveness of executive compensation contracts; (2) after differentiating firms' nature of property rights, the preceding positive effect of media coverage is found to only exist in state-owned enterprises, suggesting that media coverage could mainly increase the effectiveness of executive compensation contracts in state-owned enterprises; (3) high levels of institutional environment development significantly enhance the preceding positive effect of media coverage, implying that institutional environment is an important condition for media coverage performing the preceding effect.
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Received: 14 May 2015
Published: 29 October 2018
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