An Empirical Study On CEO 's "Lucky Payment" Of A - Share Listed Companies In China

Since the CEO compensation reform, high compensation in public companies, especially in listed SOEs, has gained much debate and is still on debate. Recently, scholars have focused on the objective factors beyond CEOs’ control which influence company performance. They put forward to the concept of "lucky pay", a new view to study CEO compensation. There are both practical and theoretical values to understand the role of "luck" in CEO compensation.On the basis of systematical literature review, combining "lucky pay hypothesis" and unique transition economic situation in China, we studied the role of "luck" in CEO compensation. Firstly, in order to visually reflect its role, we conducted a case study. Secondly, we expanded to all industries and conducted a general empirical test. Taking into account the differences between the roles of listed SOEs and nonSOEs, we further studied whether the nature of companies influenced the role of luck in CEO compensation.We found that:a)"lucky pay" existed significantly in CEO compensation, which supported the "lucky pay hypothesis"; b) regardless of accounting or market performance, the sensitivity of CEO compensation to "lucky performance" is as much as that to "whole performance"; c) after controlled the nature of stockholders,"lucky pay" still exists. SOE has a more serious "lucky pay" phenomenon, i.e. for the same increase in "lucky performance", the CEO compensation in SOE will rise much more than that in private companies.According to the principal-agent theory, shareholders meant to transfer risk to CEOs by linking the company performance to CEO pay. Because of risk aversion, CEOs asked for more compensation for more risk. Moreover, such a scheme my inspire CEOs to take risk. The "lucky pay" phenomenon in public companies, especially in listed SOEs, offered support for further CEO compensation reform. In the future, CEO incentive mechanism should be able to distinguish the real efforts of CEOs and the "lucky" part, so that unnecessary risks could be avoided.