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Performance measurement and incentive compensation: an empirical analysis and comparison of Chinese and western firms' practices

Merchant, Kenneth A, Van der Stede, Wim A. ORCID: 0000-0003-3005-2410, Lin, Thomas W. and Yu, Zengbiao (2011) Performance measurement and incentive compensation: an empirical analysis and comparison of Chinese and western firms' practices. European Accounting Review, 20 (4). pp. 639-667. ISSN 0963-8180

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Identification Number: 10.1080/09638180.2011.593293

Abstract

This paper describes the findings of a study aimed at providing a replication and extension in China of studies focused on incentive compensation practices of automobile retailers in the USA and the Netherlands. Rich, detailed data-sets from all three countries are analysed together and in comparison. As theory is not well developed at the level of detail of the data collected, the purpose of this study was primarily exploratory, to provide empirics that can lead to the development of theory. The findings show that Chinese firms are much more likely to provide incentive compensation than are Dutch firms, and they are even somewhat more likely to provide them than are US firms. But Chinese bonus plans are more likely to be subjective, rather than formula-based. In the situations where incentive payments are based on pre-set formulas, the Chinese firms' systems are more like those used in the Netherlands than in the USA, with bonuses based on non-financial performance measures and with more complex performance–reward functions. Like managers in the US firms, but unlike managers in the Dutch firms, Chinese managers who receive some form of incentive compensation are more satisfied with their pay. The paper concludes with tentative explanations of the findings and suggestions for future research.

Item Type: Article
Official URL: http://www.tandf.co.uk/journals/titles/09638180.as...
Additional Information: © 2011 European Accounting Association
Divisions: Accounting
Subjects: H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management
H Social Sciences > HF Commerce > HF5601 Accounting
JEL classification: L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior > L20 - General
L - Industrial Organization > L8 - Industry Studies: Services > L81 - Retail and Wholesale Trade; Warehousing; e-Commerce
M - Business Administration and Business Economics; Marketing; Accounting > M4 - Accounting and Auditing > M49 - Other
M - Business Administration and Business Economics; Marketing; Accounting > M5 - Personnel Economics > M52 - Compensation and Compensation Methods and Their Effects (stock options, fringe benefits, incentives, family support programs, seniority issues)
M - Business Administration and Business Economics; Marketing; Accounting > M5 - Personnel Economics > M54 - Labor Management (team formation, worker empowerment, job design, tasks and authority, work arrangemetns, job satisfaction)
Date Deposited: 06 Dec 2011 15:04
Last Modified: 13 Sep 2024 23:09
URI: http://eprints.lse.ac.uk/id/eprint/39878

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