Restricting CEO pay backfires: Evidence from China
研究中国2009年对央企CEO的薪酬限制政策，发现薪酬降低后CEO增加在职消费、侵占公司资源，企业绩效下降，表明限制薪酬会扭曲激励并带来意外后果。
Abstract Using the pay restriction imposed on CEOs of centrally administered state‐owned enterprises (CSOEs) in China in 2009, we study the effects of limiting CEO pay. Compared with CEOs of firms not subject to the restriction, the CEOs of CSOEs experienced a significant pay cut. In response to the pay cut, CEOs increased the consumption of perks and siphoned off firm resources for their own benefit. Pay‐performance sensitivity for these firms also significantly decreases. The performance of these firms dropped following the pay restriction. Our findings suggest that restricting CEO pay distorts CEO incentives and brings unintended consequences. Our findings caution against limiting CEO pay.