Who posts performance bonds and why? Evidence from China's CEOs
Despite their theoretical value in tackling principal–agent problems at low cost to firms there is almost no empirical literature on the prevalence and correlates of performance bonds posted by corporate executives. We show that they are an important feature in today's CEO labour market in Chin...
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| Format: | Article |
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Elsevier
2014
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| Online Access: | https://eprints.nottingham.ac.uk/29814/ |
| _version_ | 1848793857899102208 |
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| author | Bryson, Alex Forth, John Zhou, Minghai |
| author_facet | Bryson, Alex Forth, John Zhou, Minghai |
| author_sort | Bryson, Alex |
| building | Nottingham Research Data Repository |
| collection | Online Access |
| description | Despite their theoretical value in tackling principal–agent problems at low cost to firms there is almost no empirical literature on the prevalence and correlates of performance bonds posted by corporate executives. We show that they are an important feature in today's CEO labour market in China: around one-tenth of corporations deploy performance bonds and they are equivalent to around 14% of CEO cash compensation. Consistent with principal–agent theory bonds are negatively associated with firm sales volatility. The complementarity between bonds and other incentive mechanisms such as bonuses and stock holding is consistent with optimal reward structures for multi-tasking agents. Those CEOs posting bonds are higher in the Communist Party ranks, were promoted via tournaments, and run larger firms, findings consistent with using bonds as an incentive to attract and retain the most able workers. Although state-owned enterprises are just as likely as privately owned ones to use bonds in CEO contracts, some of the theoretical predictions which assume profit-maximising firms do not hold where the state has an ownership stake. |
| first_indexed | 2025-11-14T19:06:58Z |
| format | Article |
| id | nottingham-29814 |
| institution | University of Nottingham Malaysia Campus |
| institution_category | Local University |
| last_indexed | 2025-11-14T19:06:58Z |
| publishDate | 2014 |
| publisher | Elsevier |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | nottingham-298142020-05-04T16:44:51Z https://eprints.nottingham.ac.uk/29814/ Who posts performance bonds and why? Evidence from China's CEOs Bryson, Alex Forth, John Zhou, Minghai Despite their theoretical value in tackling principal–agent problems at low cost to firms there is almost no empirical literature on the prevalence and correlates of performance bonds posted by corporate executives. We show that they are an important feature in today's CEO labour market in China: around one-tenth of corporations deploy performance bonds and they are equivalent to around 14% of CEO cash compensation. Consistent with principal–agent theory bonds are negatively associated with firm sales volatility. The complementarity between bonds and other incentive mechanisms such as bonuses and stock holding is consistent with optimal reward structures for multi-tasking agents. Those CEOs posting bonds are higher in the Communist Party ranks, were promoted via tournaments, and run larger firms, findings consistent with using bonds as an incentive to attract and retain the most able workers. Although state-owned enterprises are just as likely as privately owned ones to use bonds in CEO contracts, some of the theoretical predictions which assume profit-maximising firms do not hold where the state has an ownership stake. Elsevier 2014-03-12 Article PeerReviewed Bryson, Alex, Forth, John and Zhou, Minghai (2014) Who posts performance bonds and why? Evidence from China's CEOs. China Economic Review, 30 . pp. 520-529. ISSN 1043-951X Performance Bonds Security Deposits Executive Compensation State-Ownership Agency Theory http://www.sciencedirect.com/science/article/pii/S1043951X14000212 doi:10.1016/j.chieco.2014.03.001 doi:10.1016/j.chieco.2014.03.001 |
| spellingShingle | Performance Bonds Security Deposits Executive Compensation State-Ownership Agency Theory Bryson, Alex Forth, John Zhou, Minghai Who posts performance bonds and why? Evidence from China's CEOs |
| title | Who posts performance bonds and why? Evidence from China's CEOs |
| title_full | Who posts performance bonds and why? Evidence from China's CEOs |
| title_fullStr | Who posts performance bonds and why? Evidence from China's CEOs |
| title_full_unstemmed | Who posts performance bonds and why? Evidence from China's CEOs |
| title_short | Who posts performance bonds and why? Evidence from China's CEOs |
| title_sort | who posts performance bonds and why? evidence from china's ceos |
| topic | Performance Bonds Security Deposits Executive Compensation State-Ownership Agency Theory |
| url | https://eprints.nottingham.ac.uk/29814/ https://eprints.nottingham.ac.uk/29814/ https://eprints.nottingham.ac.uk/29814/ |