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What do we know about China's CEO's?: evidence from across the whole economy

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  • Alex Bryson
  • Minghai Zhou

Abstract

All that we know about the CEO labour market in China comes from studies of public listed companies and state-owned enterprises (SOEs). This paper is the first to examine the operation of the CEO labour market across all sectors of the Chinese economy. We do so using World Bank enterprise data for the first part of the 21st Century. Incentive schemes are commonplace throughout the economy and include contracts linking CEO pay directly to firm performance, annual bonus schemes, the posting of performance bonds, and holding company stock. These incentive mechanisms appear to complement rather than substitute for one another. The elasticity of pay with respect to company performance is one or more in two-fifths of the cases where CEO's have performance contracts, suggesting many face high-powered incentives. CEO's also face a real dismissal threat and financial penalties if they fail to deliver. Incentive contracts are used to attract the most talented executives, as indicated by educational attainment and position in the Communist Party. However, government involvement in the appointment of a CEO reduces the likelihood that the CEO will receive an incentives-based contract, perhaps because governments appoint "bureaucrats" to perform roles which incorporate social and political as well as economic goals. Firms with good corporate governance are more likely to deploy incentive contracts. A picture emerges of a well-functioning labour market for executives in China that exhibits many of the traits common to CEO labour markets in the West.

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File URL: http://eprints.lse.ac.uk/47500/
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Bibliographic Info

Paper provided by London School of Economics and Political Science, LSE Library in its series LSE Research Online Documents on Economics with number 47500.

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Length: 24 pages
Date of creation: Sep 2012
Date of revision:
Handle: RePEc:ehl:lserod:47500

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Related research

Keywords: executive compensation; CEOs; corporate governance; agency theory; China; firm performance;

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Cited by:
  1. Alex Bryson & John Forth & Minghai Zhou, 2013. "CEO Incentive Contracts in China: Why Does City Location Matter?," CEP Discussion Papers dp1192, Centre for Economic Performance, LSE.

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