Incentive Contracts and Bank Performance: Evidence from Rural China

16 Pages Posted: 27 Feb 2007

See all articles by Hongbin Li

Hongbin Li

Chinese University of Hong Kong - Department of Economics

Scott Rozelle

University of California, Davis - Department of Agricultural and Resource Economics

Li-An Zhou

Peking University - Guanghua School of Management

Abstract

This paper, using unique survey data from the banking industry in rural China, investigates the effect of incentive contracts on performance. In the context of China's economic transition, we find that the incentive contracts have a positive effect on the bank manager's performance in deposit taking and non-performing loan reduction. This finding is robust when we control for the endogeneity of incentive contracts. Our empirical results present evidence on the positive effects of incentive-based banking reforms in rural China.

Suggested Citation

Li, Hongbin and Rozelle, Scott and Zhou, Li-An, Incentive Contracts and Bank Performance: Evidence from Rural China. Economics of Transition, Vol. 15, No. 1, pp. 109-124, January 2007, Available at SSRN: https://ssrn.com/abstract=965903 or http://dx.doi.org/10.1111/j.1468-0351.2007.00273.x

Hongbin Li (Contact Author)

Chinese University of Hong Kong - Department of Economics ( email )

Shatin, N.T.
Hong Kong

Scott Rozelle

University of California, Davis - Department of Agricultural and Resource Economics ( email )

One Shields Avenue
Davis, CA 95616
United States
530-752-9897 (Phone)

Li-An Zhou

Peking University - Guanghua School of Management ( email )

Peking University
Beijing, Beijing 100871
China

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