China’s CEO Pay Reform: An Analysis of the Financial Impact on Central State-Owned Enterprises (CSOEs)


  • Xiaochuan Tong Bradley University
  • Robert A. Kunkel University of Wisconsin Oshkosh



Event Study, Financial Analysis, Reform, CEO Compensation, State Ownership, China


China’s Central State-Owned Enterprises (CSOEs) are considered to be inefficient with major agency problems where the interests of management and shareholders are poorly aligned. Rather than making decisions that make the CSOE more profitable and to help grow the economy, management will choose to solve government problems such as social stability and low employment (retain redundant workers). As China grows its socialist market economy and lists its stocks on markets in New York and London, it has become increasingly more important to reduce agency problems to better align the interests of management and shareholders. At long last, China’s CEO pay reform is passed to reform executive compensation at CSOEs. This reform is driven by President Xi and the Central Politburo of the Communist Party of China. Using an event study methodology, we find CSOEs, on average, experience a 3.05 percent increase in market capitalization from China’s CEO pay reform. In dollar terms, the mean market capitalization increase was $89 million, and cumulatively, the twenty-four CSOEs in our sample gained $2.136 billion in market capitalization. We conclude that China’s CEO pay reform was highly successful, and the gains were a result of lower executive compensation expenses without increased perk consumption and tunneling activities.




How to Cite

Tong, Xiaochuan, and Robert Kunkel. 2022. “China’s CEO Pay Reform: An Analysis of the Financial Impact on Central State-Owned Enterprises (CSOEs) ”. Journal of Finance Issues 20 (1):72-80.



Original Article