CEO Incentive Contracts in China: Why Does City Location Matter?
AbstractCEO incentive contracts are commonplace in China but their incidence varies significantly across Chinese cities. We show that city and provincial policy experiments help explain this variance. We examine the role of two policy experiments: the use of Special Economic Zones (SEZs) to attract foreign direct investment (FDI), and the rate at which state owned enterprises (SOEs) were privatised. CEO incentive contracts are negatively correlated with foreign ownership and with the introduction of FDI via SEZs. However, the SEZ effect disappears having accounted for the city-level composition of firms and executives. Rapid SOE privatisation is associated with higher city and firm-level adoption of CEO incentive contracts, irrespective of the firm's own current ownership status. The positive effect of privatisation is robust to various estimation techniques and model specifications.
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Bibliographic InfoPaper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp1192.
Date of creation: Feb 2013
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Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP
Executive compensation; CEOs; privatisation; FDI; China; cities;
Other versions of this item:
- Alex Bryson & John Forth & Minghai Zhou, 2013. "CEO incentive contracts in China: why does city location matter?," LSE Research Online Documents on Economics 48917, London School of Economics and Political Science, LSE Library.
- Dr Alex Bryson & John Forth, 2012. "CEO Incentive Contracts in China: Why Does City Location Matter?," NIESR Discussion Papers 11165, National Institute of Economic and Social Research.
- G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
- J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
- J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
- M12 - Business Administration and Business Economics; Marketing; Accounting - - Business Administration - - - Personnel Management; Executives; Executive Compensation
- M52 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects
- O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
- P31 - Economic Systems - - Socialist Institutions and Their Transitions - - - Socialist Enterprises and Their Transitions
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-03-02 (All new papers)
- NEP-CFN-2013-03-02 (Corporate Finance)
- NEP-CNA-2013-03-02 (China)
- NEP-HRM-2013-03-02 (Human Capital & Human Resource Management)
- NEP-TRA-2013-03-02 (Transition Economics)
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