An Empirical Study of Deferred Pay Encashment for Executives and Performance at China's State-owned Companies

Deferred pay encashment as an important incentive mechanism for executives in transition economies is playing an increasingly important role in company performance, however it has not been explored by the existing literature. This study attempts to investigate the relation between deferred pay encashment and performance at China's state-owned firms, and finally finds that deferred compensation encashment has a great effect on growth by virtue of manager behaviors and impose a strongly positive effect on growth performance of a company. The study proposes that an equity-being-main incentive strategy to incorporate options and dividends into executive pay in the middle-long run needs to be implemented conditionally for state-owned firms and meanwhile different motivation means should be employed for different stages to improve management performance.