The Influence Of Political Promotion Of SOE Executives On Perquisite Consumption:Theoretical And Empirical Research

With the advancement of state-owned enterprises(SOE)reform process,formulating efficient and effective incentive plans for executives has played a key role in the whole process.Based on current researches,the study of implicit incentives mainly focused on the substitution mechanism between implicit and explicit incentive,or the effects of implicit incentives on company value.However,the study of internal relationship between different implicit incentives is rare.This paper made an in-depth analysis of CEO's implicit incentive mechanism after reviewing literatures and taking the background of the specific appointment system of SOE's CEOs in China into consideration.Based on the panel data of state-owned listed companies from 2011 to 2015,the author analyzes the inherent substitution mechanism between one implicit incentive(political promotion)and another implicit incentive(perquisite consumption).Also,a comprehensive discussion of the impact of political promotion on the perquisite consumption is conducted under diverse scenarios including management power,government control level and institutional environment.In this paper,the following results and conclusions are obtained through empirical analysis:(1)there is an asymmetric alternative between political promotion and perquisite consumption.The higher the probability of political promotion is,the more likely it is that the CEOs may limit their perquisite consumer behavior.(2)the political promotion incentive reduces perquisite consumption not only in current year,but also in the year before the promotion when CEOs' behaviors are highly assessed.In other words,an “expected effect” exists that CEOs tend to cut down their abnormal perquisite consumption dramatically when they are expected to get promoted in the future.(3)CEOs with relatively weak management power are more likely to limit their perquisite consumption when faced with political promotion incentives.(4)compared with the central state-owned enterprises,local state-owned enterprises' CEOs tend to limit their perquisite consumption,especially abnormal consumption more significantly when facing the promotion incentives.(5)the effect of promotion incentive on perquisite consumption is more prominent in monopoly industry while the effect is not significant in the competitive industry.Also,this relationship works better for SOEs in west region than in east region.The study of relationship between political promotion and perquisite consumption not only enriches current literature about implicit incentive,but also provides a new way of thinking when selecting and implementing incentives in the new round of state-owned enterprise reform.Therefore,it has both theoretical and practical significance.