A Two-way Causal Link between Internationalization and CEO Equity Ownership in Chinese Firms

Internationalization is a critical strategic decision for firms in both developed and emerging economies. Research generally focuses on the driving forces and outcomes of internationalization, especially the impact on CEO compensation. Since internationalization increases managerial complexity and risk premium, CEOs must be compensated accordingly. Their increased pay creates a convergence of interests between shareholders and managers. The relationship of internationalization with CEO compensation has been established in existing studies (Sanders & Carpenter, 1998; Oxelheim & Randøy, 2005) but they do not take into account the fact that CEO compensation is also an antecedent of international diversification.