Finally, the extant literature also suggests that the presence
of foreign ownership and foreign control indicates higher
monitoring quality. By the same token, if monitoring by
owners and equity incentives are substitute mechanisms as
predicted by agency theory, we would expect a negative
relation between equity incentives and the presence of
foreign ownership. Despite these insights, there is currently
no evidence on how ownership structure affects CEO pay
directly, nor is there evidence on the ownership effect on the
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provision of equity incentives in China.We make the following
predictions in the light of this discussion.
Hypothesis 2b. Chinese CEO equity incentives are negatively
related to concentrated share ownership, positively related to
state-owned enterprises, and negatively related to foreigncontrolled
firms.