Publication Type
Working Paper
Version
publishedVersion
Publication Date
2009
Abstract
We investigate the impact of CEO’s compensation-based and promotion-based incentives on firm performance in China, where the CEOs of most state-owned enterprises are government appointed and thus face dual incentives. We find that both monetary and political incentives are positively related to firm performance. More important, we pinpoint a substitution effect: the monetary compensation-based incentive is weaker when CEO incentives are heavily driven by political career concerns. Overall, the evidence suggests that, via a competitive arena in the external political job market, promotion helps mitigate weak incentives for CEOs in China. State control or political connection is not necessarily inconsistent with good economic incentives.
Keywords
Managerial incentives, political promotion, firm performance, CEO compensation
Discipline
Human Resources Management
Research Areas
Organisational Behaviour and Human Resources
Citation
CAO, Xiaping Jerry; LEMMON, MICHAEL; TIAN, GARY; and PAN, XIAOFEI.
Political Promotion, Ceo Compensation, and Their Effect on Firm Performance. (2009).
Available at: https://ink.library.smu.edu.sg/lkcsb_research/1816
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.