The relation between executive compensation and firm performance in Chinese family firms: Moderating role of family management

The purpose of this paper is to research the impact of family management on the incentive effect of executive compensation in Chinese family firms. This paper examines the relation between executive compensation and corporate performance from perspective of family management using a sample of 231 Chinese family listed companies during the period of 2010-2012. This study indicates that family management has the moderating role on the relation between executive compensation and firm performance. Furthermore, we also find that this role is the entrenchment effect. Therefore this paper indicates that family management is closely related to the incentive effect of executive compensation. These results may support family management explanation for the strength of the incentive effect of executive compensation and provide references for family enterprises to establish a reasonable executive compensation mechanism.