CEO promotion, relative performance measures, and institutions in an emerging market: evidence from China’s listed state-owned enterprise

Hu, Fang and Zhang, Yahua (2016) CEO promotion, relative performance measures, and institutions in an emerging market: evidence from China’s listed state-owned enterprise. In: The political economy of Chinese finance. International Finance Review, 17. Emerald Group Publishing Limited, United Kingdom, pp. 115-148. ISBN 978-1-78560-958-9

[img]
Preview
Text (Submitted Version)
Incentive plans with RPE .pdf

Download (203Kb) | Preview

Abstract

This paper investigates CEO turnover and the usefulness of relative performance evaluation (RPE) as a management incentive in an emerging economy lacking market-based competition. In a sample of China’s listed state-owned enterprises (SOEs) from the period 2001-2005, we find that 41% of departing CEOs in SOEs is being promoted. The promotion is positively associated with preceding firm performance relative to peers in the same region and this association is more significant than that between the promotion and firm’s specific performance. Furthermore, the promotion outperforms other incentive schemes such as CEO demotions by 5%-8% in terms of subsequent Tobin’s Q in three years. These consequences persist in undeveloped regions where there are fewer firms listed on the stock market, a lower stock market capitalization, or a higher regional Herfindahl-Hirschman Index. The findings imply that promotion based on RPE provides a critical incentive by creating competitions.


Statistics for USQ ePrint 30129
Statistics for this ePrint Item
Item Type: Book Chapter (Commonwealth Reporting Category B)
Refereed: Yes
Item Status: Live Archive
Additional Information: Submitted Version deposited in accordance with the copyright policy of the publisher.
Faculty / Department / School: Current - Faculty of Business, Education, Law and Arts - School of Commerce
Date Deposited: 15 May 2017 23:46
Last Modified: 22 Feb 2018 02:42
Uncontrolled Keywords: incentive scheme, promotion, Relative Performance Evaluation (RPE), market competition, China’s SOEs
Fields of Research : 14 Economics > 1402 Applied Economics > 140207 Financial Economics
Socio-Economic Objective: B Economic Development > 91 Economic Framework > 9102 Microeconomics > 910202 Human Capital Issues
Identification Number or DOI: 10.1108/S1569-376720160000017011
URI: http://eprints.usq.edu.au/id/eprint/30129

Actions (login required)

View Item Archive Repository Staff Only