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Incentive contracts and bank performance

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  • Hongbin Li
  • Scott Rozelle
  • Li-An Zhou

Abstract

This paper, using unique survey data from the banking industry in rural China, investigates the effect of incentive contracts on performance. In the context of China's economic transition, we find that the incentive contracts have a positive effect on the bank manager's performance in deposit taking and non-performing loan reduction. This finding is robust when we control for the endogeneity of incentive contracts. Our empirical results present evidence on the positive effects of incentive-based banking reforms in rural China. Copyright (c) 2007 The Authors Journal compilation (c) 2007 The European Bank for Reconstruction and Development.

Suggested Citation

  • Hongbin Li & Scott Rozelle & Li-An Zhou, 2007. "Incentive contracts and bank performance," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 15(1), pages 109-124, March.
  • Handle: RePEc:bla:etrans:v:15:y:2007:i:1:p:109-124
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    1. repec:eee:rensus:v:78:y:2017:i:c:p:780-797 is not listed on IDEAS
    2. Isaev, Mirolim & Masih, Mansur, 2017. "Macroeconomic and bank-specific determinants of different categories of non-performing financing in Islamic banks: Evidence from Malaysia," MPRA Paper 79719, University Library of Munich, Germany.
    3. Louzis, Dimitrios P. & Vouldis, Angelos T. & Metaxas, Vasilios L., 2012. "Macroeconomic and bank-specific determinants of non-performing loans in Greece: A comparative study of mortgage, business and consumer loan portfolios," Journal of Banking & Finance, Elsevier, vol. 36(4), pages 1012-1027.

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