Design of Social Responsibility Incentive Contracts for Stakeholders of Megaprojects under Information Asymmetry

Feng Xue, Guangyu Chen, Shanming Huang and Huan Xie
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Feng Xue: School of Management and Economics, University of Electronic Science and Technology of China, Chengdu 611731, China
Guangyu Chen: School of Management and Economics, University of Electronic Science and Technology of China, Chengdu 611731, China
Shanming Huang: School of Management and Economics, University of Electronic Science and Technology of China, Chengdu 611731, China
Huan Xie: Sichuan Provincial Branch of Southwest Regional Headquarters, China Communications Construction Company Ltd., Chengdu 610218, China

Sustainability, 2022, vol. 14, issue 3, 1-20

Abstract: Social responsibility is essential to the sustainable development of megaprojects. A transparent and symmetrical information-sharing mechanism is an important guarantee for promoting megaproject stakeholders to fulfill their social responsibilities and improve project efficiency. Aiming at the problems of megaproject subcontractors concealing social responsibility information, which leads to unsmooth information channels and low project efficiency, this paper compares and analyzes the single-stage revenue-sharing model under symmetric and asymmetric information from the perspective of incentive contract design. Then, a two-stage incentive contract with multiple indicators under asymmetric information is designed using principal-agent theory. The research results show that the social responsibility effort level of the general contractor and the total project revenue is positively correlated with the input–output ratio, and is negatively correlated with the degree of information opacity of the subcontractor’s social responsibility. Incentive contracts with multiple indicators in stages can effectively encourage subcontractors to disclose social responsibility information, and reduce information asymmetry, therefore enhancing social responsibility and improving overall project efficiency. This research transforms the research on the social responsibility of megaprojects from qualitative to quantitative. The research results provide theoretical methods and decision-making basis for megaproject general contractors to encourage subcontractors to improve social responsibility.

Keywords: megaproject; social responsibility; stakeholder; moral hazard; information asymmetry; incentive mechanism (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2022
References: View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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