Influence Activities and Favoritism in Subjective Performance Evaluation: Evidence from Chinese State-owned Enterprises
Accounting Review, Vol. 87, No. 5, September 2012
53 Pages Posted: 7 Aug 2009 Last revised: 16 Jan 2013
Date Written: February 14, 2012
Abstract
This study addresses the two-way process in which a subordinate and a superior engage in influence activities (bottom-up) and favoritism (top-down) in subjective performance evaluation. The research context is the Chinese government’s evaluation of Chinese state-owned enterprises (SOEs) by the State-owned Assets Supervision and Administration Commission of China (SASAC). We analyze archival records of the government’s evaluation scores, score adjustments, and evaluation ratings given to 63 SOEs between 2005 and 2007. These analyses are also interpreted based on insights gained from in-depth field interviews with SASAC officials and CFOs of SOEs. Results indicate that the political connection of SOE CFOs, the geographic proximity of SOE headquarters to the SASAC central office, and political rank of the firm affects the SASAC’s evaluations.
Keywords: Subjective Performance Evaluation, favoritism, influence activities, political connections, geographic proximity, State-owned Asset Supervision and Administration Council (SASAC), Chinese state-owned enterprises (SOEs)
JEL Classification: M41
Suggested Citation: Suggested Citation
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