Work

Political ranks, incentives and firm performance

Year: 2015

Type: article

Abstract: Managers in China’s state-owned enterprises (SOEs) keep their ranks within a political hierarchy system either explicitly or implicitly, and enjoy different kinds of welfare affiliated to these ranks. In this paper, we analyse how the political rank system works as an incentive on the managers of SOEs and empirically examine the effect of political hierarchy on firm performance. We find that the higher is the political rank of a firm’s manager, the better the firm performs. We further find that managers’ cash compensation does not increase with their political rank, suggesting that political rank provides incentives in addition to cash compensation.

Source: China Journal of Accounting Studies

DOI: 10.1080/21697213.2015.1045401

Authors: Shangkun Liang, Zhen Li, Donghua Chen, Shimin Chen

Institutions: Central University of Finance and Economics, National University of Singapore, Nanjing University, China Europe International Business School

Language: English

Topic: Political Influence and Corporate Strategies

Subfield: Strategy and Management

Field: Business, Management and Accounting

Domain: Social Sciences

SDG: Decent work and economic growth

Open Access status: bronze

Funder: National Science Foundation