Abstract
Using an unbalanced panel which consists of a total of 43626 executives in 1362 publicly listed corporations (PLCs) in China during 1999 and 2007, this paper empirically examines several theories of managerial compensation. The paper finds that pay increases as executives move up the corporate hierarchy into higher ranks. In addition, pay gap is the largest between the first and second tier executives. Moreover, pay dispersion is positively related to the number of tournament participants, the level of noise in the business environment and firm performance. The empirical results are consistent with the tournament theory and against equity, relative deprivation and sabotage theories.
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