Incentives for CEOs with multitasks: Evidence from Chinese state-owned enterprises

Because each of the agent's multitasks can have several measures, the multitask agency theory predicts that incentive devices based on these measures can be complements or substitutes. However, the existing empirical literature on multitask agency considers only complementarity. This paper investigates both complementarity and substitutability of measures of CEO compensation theoretically and empirically. Using a panel data set of CEO contracts from more than 300 Chinese state-owned enterprises, we find empirical evidence that profits are not the only objective of the Chinese government in designing CEO contracts. Our findings about the determinants of incentive devices in China support predictions of the agency theory and the incomplete contracts theory. Journal of Comparative Economics 33 (3) (2005) 517-539. School of Economics and Management, Tsinghua University, Beijing 100084, China; The University of Hong Kong; Mail Stop MC 3-300, The World Bank, 1818 H Street, NW Washington, DC 20433, USA; Guanghua School of Management, Peking University. (c) 2005 Association for Comparative Economic Studies. Published by Elsevier Inc. All rights reserved.