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Institutional Shareholders and Executive Compensation: An Ethical View

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Entrepreneurship, Finance, Governance and Ethics

Part of the book series: Advances in Business Ethics Research ((ABER,volume 3))

Abstract

While institutional shareholders are shown to be effective monitors in curbing executive compensation in mature capital markets, this study presents findings from Chinese stock markets, and indicates the possible collusion between institutional shareholders (e.g. mutual funds) and executives in publicly listed companies. Mutual funds in China fail to serve as an effective monitor of executive compensation, suggesting that ethics seems to play no part when mutual funds and the management of listed companies extract their self-interests. Further analysis also demonstrates that, while bank-affiliated mutual funds are not better monitors than non-bank-affiliated ones, joint-equity-bank-affiliated ones are more effective monitors than state-owned-bank-affiliated ones.

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Notes

  1. 1.

    Common stocks in China consist of both tradable shares and non-tradable shares. This is one of the typical features of Chinese markets, and will be further discussed in the next section.

  2. 2.

    According to the People Daily, employees in Chinese urban areas earn, on average, RMB24,932 in 2007. Source: politics.people.com.cn/GB/1027/8375733.html

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Author information

Authors and Affiliations

  1. Telfer School of Management, University of Ottawa, Ottawa, ON, Canada

    Shujun Ding

  2. Department of Finance, Guanghua School of Management, Peking University, Beijing, China

    Chunxin Jia

  3. Department of Finance, Ted Rogers School of Business Management, Ryerson University, Toronto, ON, Canada

    Yuanshun Li

  4. Asper School of Business, University of Manitoba, Winnipeg, MB, Canada

    Zhenyu Wu

Authors
  1. Shujun Ding
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  2. Chunxin Jia
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  3. Yuanshun Li
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  4. Zhenyu Wu
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Corresponding author

Correspondence to Shujun Ding .

Editor information

Editors and Affiliations

  1. , School of Business, University of Birmingham, Edgbaston Road, Birmingham, B15 2TY, United Kingdom

    Robert Cressy

  2. , Schulich School of Business, York University, Keele Street 4700, Toronto, M3J 1P3, Ontario, Canada

    Douglas Cumming

  3. , Norwich Business School, University of East Anglia, Norwich Research Park, Norwich, NR4 7TJ, United Kingdom

    Chris Mallin

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Ding, S., Jia, C., Li, Y., Wu, Z. (2013). Institutional Shareholders and Executive Compensation: An Ethical View. In: Cressy, R., Cumming, D., Mallin, C. (eds) Entrepreneurship, Finance, Governance and Ethics. Advances in Business Ethics Research, vol 3. Springer, Dordrecht. https://doi.org/10.1007/978-94-007-3867-6_16

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