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Political Promotion, Ceo Compensation, and Their Effect on Firm Performance
Research Collection Lee Kong Chian School Of Business
  • Xiaping Jerry CAO, Singapore Management University
  • GARY TIAN, University of Wollongong
  • XIAOFEI PAN, University of Wollongong
Publication Type
Working Paper
Publication Date
We investigate the impact of CEO’s compensation-based and promotion-based incentives on firm performance in China, where the CEOs of most state-owned enterprises are government appointed and thus face dual incentives. We find that both monetary and political incentives are positively related to firm performance. More important, we pinpoint a substitution effect: the monetary compensation-based incentive is weaker when CEO incentives are heavily driven by political career concerns. Overall, the evidence suggests that, via a competitive arena in the external political job market, promotion helps mitigate weak incentives for CEOs in China. State control or political connection is not necessarily inconsistent with good economic incentives.
  • Managerial incentives,
  • political promotion,
  • firm performance,
  • CEO compensation
Citation Information
Xiaping Jerry CAO, MICHAEL LEMMON, GARY TIAN and XIAOFEI PAN. "Political Promotion, Ceo Compensation, and Their Effect on Firm Performance" (2009)
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