Abstract/Summary

This thesis attempts to investigate the importance of political promotion among the incentives for CEOS working in China's State-owned enterprises (SOEs). Data and benchmark regressions in this thesis show that CEO's monetary payments is not sensitive to firm performance in SOEs. However, there are clear evidences that CEOs have strong incentives to improve firm performance. This observation violates the predictions of traditional CEO remuneration design theory. To account for this difference, this thesis proposes that political promotion matters significantly for CEOs of SOEs. China's SOEs are supervised by the State-owned Asset Supervision and Administration Commission (SASAC), who has the power to decide political promotion of CEOs. Because political promotion is closely related to firm performance and other criteria set by SASAC (such as the growth rate of asset size), this thesis shows that, CEOs of SOEs have strong incentives to improve firm performance in order to increase the changes to be promoted. This thesis uses two case studies and a survey analysis to test the hypothesis. It concludes that CEOs of SOEs case about political promotion far more than monetary payments