Career Concerns and 'Unpaid' Executives

52 Pages Posted: 16 Aug 2016 Last revised: 24 May 2018

See all articles by Hui Chen

Hui Chen

University of Zurich

Wei Luo

Peking University - Guanghua School of Management

Naomi S. Soderstrom

University of Melbourne

Multiple version iconThere are 2 versions of this paper

Date Written: May 21, 2018


A significant portion of CEOs in publicly-listed Chinese state-owned enterprises receive zero pay from the companies for which they work. Instead, they are paid directly by their controlling shareholder who can be the Chinese government or parent firms controlled by the Chinese government. While their actual pay is unobservable, it is known to be low and contain few performance-based incentives. We explore how these parent-paid executives are motivated and whether the outcomes of this unusual incentive differ from conventional compensation. Consistent with career concerns as their main incentive, we find that these CEOs have a significantly higher probability of future promotion than other CEOs. We also conduct an event study using the Split Share Structure Reform in 2005. The reform liberalized the Chinese stock market and enhanced the role of the market mechanisms that potentially replaced promotion incentives in executive compensation contracts. Our evidence is generally consistent with a reduction in the strength of promotion incentives following the reform. Further analyses indicate that, compared to peers that directly pay their CEOs, firms with parent-paid CEOs have higher return on assets and asset growth, and they experience less tunneling by their shareholders.

Keywords: Career concerns, promotion, Chinese SOEs, executive compensation

JEL Classification: G30; J30; M12; M52

Suggested Citation

Chen, Hui and Luo, Wei and Soderstrom, Naomi S., Career Concerns and 'Unpaid' Executives (May 21, 2018). AAA 2017 Management Accounting Section (MAS) Meeting, Available at SSRN: or

Hui Chen

University of Zurich ( email )

Plattenstrasse 14
Zurich, CH-8032

Wei Luo (Contact Author)

Peking University - Guanghua School of Management ( email )

Room 461 Guanghua Building
Peking University
Beijing, Beijing 100871

Naomi S. Soderstrom

University of Melbourne ( email )

Melbourne, 3010

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