Remuneration of family CEO and firm financial performance in Hong Kong: a comparison between family and non-family firm

The aim of this research was to examine the relationship between the remuneration of family CEOs and their firm’s financial performance and its affect in various industrial sectors, stockholding of family and non-family members, and the type of CEOs in Hong Kong publicly traded firms. There are very few studies conducted in Hong Kong that examine these relationships that this research sought to address. Thus this study collected empirical data to examine the relationship. A quantitative causal comparative study was conducted to examine the relationships between identified variables. The research questions considered the relationship of CEO remuneration and the firm's financial performance based on measures such as Tobin Q, ROA, and ROE as well as how factors such as stockholdings of each type of CEO, family and non-family CEO affect the relationship between CEO remuneration and the firm's financial performance. The research questions also considered the differences of CEO remuneration and the firm's financial performance based on factors such as type of CEO, firm ownership, and industry sector. The dataset consisted of 510 firms and after adjustments; the final sample for the dataset was 382 publicly traded firms on the HSCII for the year ending 2014. Data pertaining to the financial position of the firm in terms of Tobin’s Q, ROA and ROE were calculated from the figures found in the annual reports. Other variables such as CEO’s remuneration, the type of CEO, industry sector and stockholdings were collected from companies’ annual reports. Similarly, control variables in terms of firm size, firm debt, CEO duality, CEO gender, age of CEO and market capitalization were collected from annual reports. Data collected were manually compiled in an EXCEL spreadsheet which was then exported to SPSS for analysis and hypotheses testing. The results indicate that for firms from the nine HSCII industrial sectors, the type of industry is positively related to the firm’s performance in terms of TQ, ROA and ROE. The type of industry and the relationship between family CEOs and firms’ financial performance was also positive and significant. Remuneration of family CEOs and firms’ performance was found to be positively and significantly related. However, stockholdings of family CEOs do not significantly affect the relationship between the remuneration of family CEOs and TQ, but has a positively significant moderating effect on ROA and ROE. The results of the regression for the TQ, ROA and ROE model indicate a strong and significant relationship with the independent variables.