| By: |
Alex Bryson;
John Forth;
Minghai Zhou |
| 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 |
| JEL: |
G34 J31 J33 M12 M52 O16 P31 |
| Date: |
2013–02 |
| URL: |
http://d.repec.org/n?u=RePEc:cep:cepdps:dp1192&r=cfn |