CEO Incentive Contracts in China: Why Does City Location Matter?

Alex Bryson, John Forth and Minghai Zhou ()

CEP Discussion Papers from Centre for Economic Performance, LSE

Abstract: CEO 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.

Keywords: Executive compensation; CEOs; privatisation; FDI; China; cities (search for similar items in EconPapers)
JEL-codes: G34 J31 J33 M12 M52 O16 P31 (search for similar items in EconPapers)
Date: 2013-02
New Economics Papers: this item is included in nep-cfn, nep-cna, nep-hrm and nep-tra
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https://cep.lse.ac.uk/pubs/download/dp1192.pdf (application/pdf)

Related works:
Chapter: CEO Incentive Contracts in China: Why Does City Location Matter? (2014)
Working Paper: CEO incentive contracts in China: why does city location matter? (2013)
Working Paper: CEO Incentive Contracts in China: Why Does City Location Matter? (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:cep:cepdps:dp1192

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