Analyst following and pay-performance sensitivity: evidence from China

Document Type

Article

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Keywords

executive compensation; pay-performance sensitivity; financial analysts; state-owned entities

Identifier Data

https://doi.org/10.1080/00036846.2018.1441508

Publisher

Taylor & Francis

Publication Source

Applied Economics, 50(37)

Abstract

We examine whether analyst following is associated with pay-performance sensitivity in China. Based on our analyses of 17,020 Chinese firm-years from 2007 to 2015, we find that pay-performance sensitivity is higher when companies are followed by financial analysts. We also find that the analyst following/pay-performance sensitivity relationship is stronger for non-state-owned enterprises (SOEs) than for SOEs. Overall, our results indicate that companies followed by financial analysts exhibit more pay-performance-sensitivity, which is consistent the notion that financial analysts can serve an external monitoring role.

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