Incentives for CEOS with Multitasks: Evidence from Chinese State-Owned Enterprises

42 Pages Posted: 12 Apr 2005

See all articles by Chong-En Bai

Chong-En Bai

The University of Hong Kong - School of Economics and Finance; University of Michigan - William Davidson Institute

Lixin Colin Xu

Cheung Kong Graduate School of Business

Abstract

Because each of the agent's multitasks can have several measures, the multitask agency theory predicts that incentive devices based on these measures can be complements or substitutes. However, the existing empirical literature on multitask agency considers only complementarity. This paper investigates both complementarity and substitutability of measures of CEO compensation theoretically and empirically. Using a panel data set of CEO contracts from more than 300 Chinese state-owned enterprises, we find empirical evidence that profits are not the only objective of the Chinese government in designing CEO contracts. Our findings about the determinants of incentive devices in China support predictions of the agency theory and the incomplete contracts theory.

Keywords: CEO compensation, agency, multitask, complementarity, state-owned enterprises

JEL Classification: D82, J33, J41, M12, L02, L30, P50, G30

Suggested Citation

Bai, Chong-En and Xu, Lixin Colin, Incentives for CEOS with Multitasks: Evidence from Chinese State-Owned Enterprises. Available at SSRN: https://ssrn.com/abstract=686427

Chong-En Bai

The University of Hong Kong - School of Economics and Finance ( email )

8th Floor Kennedy Town Centre
23 Belcher's Street
Kennedy Town
Hong Kong
(852) 2859-1036 (Phone)
(852) 2548-1152 (Fax)

University of Michigan - William Davidson Institute ( email )

724 E. University Ave.
Wyly Hall
Ann Arbor, MI 48109-1234
United States

Lixin Colin Xu (Contact Author)

Cheung Kong Graduate School of Business ( email )

1017, Oriental Plaza 1
No.1 Dong Chang'an Street
Beijing
China

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