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Deferred Executive Compensation Policies in Chinese State‐owned Enterprises

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  • Min Ju

Abstract

Since the commencement of industrial reform in China, most Chinese state‐owned enterprises have adopted a deferred executive compensation policy to provide incentives for their management teams. However, the effectiveness of such a policy needs to be evaluated. In this paper, we specify a model of deferred executive compensation policy, in which the compensation for executives is contingent on firms' future revenue. The model suggests that under deferred executive compensation policies, managers exhibit an increasing level of effort in every period. Furthermore, the deferred compensation policy encourages managers to make long‐term investments, which might generate revenue even after the termination of managerial contracts.

Suggested Citation

  • Min Ju, 2007. "Deferred Executive Compensation Policies in Chinese State‐owned Enterprises," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 15(4), pages 102-117, July.
    • Handle: RePEc:bla:chinae:v:15:y:2007:i:4:p:102-117
    DOI: 10.1111/j.1749-124X.2007.00078.x
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    References listed on IDEAS

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    1. Takao Kato & Cheryl Long, 2004. "Executive Compensation, Firm Performance, and State Ownership in China: Evidence from New Panel Data," William Davidson Institute Working Papers Series 2004-690, William Davidson Institute at the University of Michigan.
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    Cited by:

    1. Jiang, Wei & Liu, Yunguo & Lobo, Gerald J. & Xu, Yue, 2019. "Deferred cash compensation and risk-taking: Evidence from the Chinese banking industry," Pacific-Basin Finance Journal, Elsevier, vol. 53(C), pages 432-448.

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