Executive Compensation of SOEs and Corporate Social Responsibility: Theory and Evidence from China

58 Pages Posted: 2 Feb 2020 Last revised: 13 Apr 2020

See all articles by Jiaxing Li

Jiaxing Li

University of London, School of Oriental and African Studies (SOAS) - Economics

Jim Huangnan Shen

School of Management, Fudan University ; Center for International Development, Harvard Kennedy School, Harvard University

Chien-Chiang Lee

Nanchang University

Date Written: January 4, 2020

Abstract

This paper proposes a Nash Bargaining model to show that there exits the inverted U-shaped relationship between state-owned enterprises (SOEs)’ corporate social responsibility (CSR) performance and the level of executive compensation received by SOE managers. Based on annual data for Chinese-listed SOEs over the period 2013-2018, this research also empirically explores the effect of executive compensation on CSR performance. Our empirical results show that the executive compensation of SOEs has an inverted U-shaped effect on CSR fulfillment, and that the inverted U-shaped effect is robust to endogeneity corrections. Subsample analysis suggests that marginal contributions of executive compensation on CSR performance are different in the secondary industry and service industry. The ERG hierarchy of needs and the upper echelon theory help explain the non-linear effects. Based on our both theoretical predictions and empirical results, this paper provides a new channel of unlocking the dynamics of CSR fulfillment.

Keywords: Corporate social responsibility; Executive compensation; State-owned enterprises; Inverted U-shaped effect; China

JEL Classification: G34, G38, O16

Suggested Citation

Li, Jiaxing and Shen, Jim Huangnan and Lee, Chien-Chiang, Executive Compensation of SOEs and Corporate Social Responsibility: Theory and Evidence from China (January 4, 2020). Available at SSRN: https://ssrn.com/abstract=3513996 or http://dx.doi.org/10.2139/ssrn.3513996

Jiaxing Li

University of London, School of Oriental and African Studies (SOAS) - Economics ( email )

London, WC1E 7HU
United Kingdom

Jim Huangnan Shen (Contact Author)

School of Management, Fudan University ( email )

Shanghai
China

Center for International Development, Harvard Kennedy School, Harvard University ( email )

One Eliot Street Building
79 JFK Street
Cambridge, MA 02138
United States

Chien-Chiang Lee

Nanchang University ( email )

999 Xuefu Avenue
Hong Gu Tan New District
Nanchang, Jiangxi 330031
China
330031 (Fax)

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