Executive compensation in family firms: The effect of multiple family members

We explore the conflicts between the controlling founder of a firm and her family members by studying how their ownership affects executive compensation differently. Using a sample of family firms in China, we find that the ownership of a controlling family owner is negatively correlated with the le...

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Bibliographic Details
Published in:Journal of corporate finance (Amsterdam, Netherlands) Netherlands), 2015-06, Vol.32, p.238-257
Main Authors: Cheng, Minying, Lin, Bingxuan, Wei, Minghai
Format: Article
Language:English
Subjects:
Business ownership
China
Corporate governance
Correlation analysis
Executive compensation
Family firms
Family owned businesses
Ownership structure
Pay for performance
Studies
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Summary:We explore the conflicts between the controlling founder of a firm and her family members by studying how their ownership affects executive compensation differently. Using a sample of family firms in China, we find that the ownership of a controlling family owner is negatively correlated with the level of executive compensation and has a positive effect on pay-for-performance sensitivity. However, the ownership of other family members is positively associated with executive compensation and has a negative effect on pay-for-performance sensitivity. We find that when the quality of corporate governance is low and when other family members hold excess control rights in the firm, the unfavorable effect of other family members is more striking.
ISSN:0929-1199
1872-6313
DOI:10.1016/j.jcorpfin.2014.10.014