Does state control affect managerial incentives? Evidence from china's publicly listed firms

Chen Lin; Dongwei Su

doi:10.3846/1611-1699.2009.10.291-311

Does state control affect managerial incentives? Evidence from china's publicly listed firms

Chen Lin
, Dongwei Su

City University of Hong Kong

Research output: Journal Publications and Reviews › RGC 21 - Publication in refereed journal › peer-review

17 Citations (Scopus)

4 Downloads (CityUHK Scholars)

Abstract

Using data for 1203 publicly listed firms in China during 1999-2002, this paper empirically investigates whether and to what extent state control affects managerial incentives, including managerial compensation and CEO turnover. The paper fmds that CEO turnover is negatively related to both current and lagged firm performance as measured by ROA and RPE (Relative Performance Evaluation) for non-state-controlled firms, while insensitive to performance measures for state-controlled firms. In addition, CEO compensation is positively related to firm performance, but state ownership and control weaken this positive relation. Moreover, state control reduces the effectiveness of internal governance mechanisms such as the board of directors and supervisory committee. Overall, empirical results in the paper indicate that state ownership and control weaken managerial incentives and internal monitoring among publicly listed firms in China.
Copyright © 2009 The Author(s)

Original language	English
Pages (from-to)	291-311
Journal	Journal of Business Economics and Management
Volume	10
Issue number	4
DOIs	https://doi.org/10.3846/1611-1699.2009.10.291-311
Publication status	Published - 2009

Bibliographical note

Publication details (e.g. title, author(s), publication statuses and dates) are captured on an “AS IS” and “AS AVAILABLE” basis at the time of record harvesting from the data source. Suggestions for further amendments or supplementary information can be sent to [email protected].

Funding

We also thank financial supports from the National Natural Science Foundation of China (Grant No. 70572065 and 70972081), China Ministry of Education (the Program for New Century Excellent Talents in University NCET-08-0614), the Guangdong Pearl River Scholar Fund, Guangdong Natural Science Foundation (Grant No. 9151063201000050) and the Guangdong Project of Key Research Institute of Humanities and Social Sciences at Universities (Grant No. 07JDTDXM79005).

Research Keywords

China
Corporate governance
Managerial incentives
Partial privatization
State control

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This full text is made available under CC-BY 4.0. https://creativecommons.org/licenses/by/4.0/

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title = "Does state control affect managerial incentives? Evidence from china's publicly listed firms",

abstract = "Using data for 1203 publicly listed firms in China during 1999-2002, this paper empirically investigates whether and to what extent state control affects managerial incentives, including managerial compensation and CEO turnover. The paper fmds that CEO turnover is negatively related to both current and lagged firm performance as measured by ROA and RPE (Relative Performance Evaluation) for non-state-controlled firms, while insensitive to performance measures for state-controlled firms. In addition, CEO compensation is positively related to firm performance, but state ownership and control weaken this positive relation. Moreover, state control reduces the effectiveness of internal governance mechanisms such as the board of directors and supervisory committee. Overall, empirical results in the paper indicate that state ownership and control weaken managerial incentives and internal monitoring among publicly listed firms in China. Copyright {\textcopyright} 2009 The Author(s)",

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author = "Chen Lin and Dongwei Su",

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AU - Lin, Chen

AU - Su, Dongwei

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N2 - Using data for 1203 publicly listed firms in China during 1999-2002, this paper empirically investigates whether and to what extent state control affects managerial incentives, including managerial compensation and CEO turnover. The paper fmds that CEO turnover is negatively related to both current and lagged firm performance as measured by ROA and RPE (Relative Performance Evaluation) for non-state-controlled firms, while insensitive to performance measures for state-controlled firms. In addition, CEO compensation is positively related to firm performance, but state ownership and control weaken this positive relation. Moreover, state control reduces the effectiveness of internal governance mechanisms such as the board of directors and supervisory committee. Overall, empirical results in the paper indicate that state ownership and control weaken managerial incentives and internal monitoring among publicly listed firms in China. Copyright © 2009 The Author(s)

AB - Using data for 1203 publicly listed firms in China during 1999-2002, this paper empirically investigates whether and to what extent state control affects managerial incentives, including managerial compensation and CEO turnover. The paper fmds that CEO turnover is negatively related to both current and lagged firm performance as measured by ROA and RPE (Relative Performance Evaluation) for non-state-controlled firms, while insensitive to performance measures for state-controlled firms. In addition, CEO compensation is positively related to firm performance, but state ownership and control weaken this positive relation. Moreover, state control reduces the effectiveness of internal governance mechanisms such as the board of directors and supervisory committee. Overall, empirical results in the paper indicate that state ownership and control weaken managerial incentives and internal monitoring among publicly listed firms in China. Copyright © 2009 The Author(s)

KW - China

KW - Corporate governance

KW - Managerial incentives

KW - Partial privatization

KW - State control

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DO - 10.3846/1611-1699.2009.10.291-311

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JO - Journal of Business Economics and Management

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IS - 4

ER -

Does state control affect managerial incentives? Evidence from china's publicly listed firms

Abstract

Bibliographical note

Funding

Research Keywords

Publisher's Copyright Statement

Policy Impact

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