Institutional investors, controlling shareholders and CEO pay‐performance relationship: evidence from China

Using a large sample of China\u27s listed firms between 2005 and 2015, we find that domestic mutual funds have a positive effect on the CEO pay‐performance relationship, and this effect becomes stronger when their ownership is higher and closer to the controlling shareholder\u27s ownership. This effect is stronger in non‐state‐owned enterprises (non‐SOEs), firms facing weaker industry competition incentives, and firms located in more developed regions. However, Qualified Foreign Institutional Investors (QFIIs) do not have such an influence. Overall, our study contends that the effectiveness of institutional investors\u27 monitoring role is subject to their identity, controlling shareholders and institutional environments