Political Promotion, Ceo Compensation, and Their Effect on Firm Performance
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...
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| Main Authors: | , , , |
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| Format: | text |
| Language: | English |
| Published: |
Institutional Knowledge at Singapore Management University
2009
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| Subjects: | |
| Online Access: | https://ink.library.smu.edu.sg/lkcsb_research/1816 https://ink.library.smu.edu.sg/context/lkcsb_research/article/2815/viewcontent/JerryCaoCEOCompensationandPoliticalCareer.pdf |
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| Institution: | Singapore Management University |
| Language: | English |
| Summary: | 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. |
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