CEO power, ownership structure and pay performance in Chinese banking

• It examines the determinants of executive compensation in Chinese banking.
• It identifies four sources of CEO power including structural power and ownership power.
• The pay performance relation does not hold in Chinese banking.
• CEO power does not necessarily exhibit higher levels of executive compensation.
• Ownership structure is significant in determining executive pay in Chinese banking.

This paper examines the determinants of executive compensation in Chinese banking during 2005–2012. Using the fixed effects panel, 2SLS and dynamic GMM regressions, I find that there is no significant positive pay performance relation, and CEO power does not necessarily exhibit higher levels of executive compensation. However, I show that ownership structure (measured by ownership concentration and ownership identification) and compensation committee are significant in determining executive compensation in Chinese banking. It suggests that government may ensure efficient monitoring functions when the pay incentive is ineffective. The results have important implication on bank regulation and corporate governance in emerging markets.