The authors study the impact of government-led incentive systems by examining a staggered reform in the Chinese state-owned enterprise (SOE) performance evaluation policy. To improve capital allocative efficiency, in 2010, regulators switched from using return on equity (ROE) to economic value added (EVA) when evaluating SOE performance. This EVA policy adopts a one-size-fits-all approach by stipulating a fixed cost of capital for virtually all SOEs, ignoring the potential heterogeneity of firm-specific costs of capital. The authors show that SOEs did respond to the performance evaluation reform by altering their investment decisions, more so when the actual borrowing rate was further away from the stipulated cost of capital. The authors paper provides causal evidence that incentive schemes affect real investment and sheds new light on challenges faced by economic reforms in China.

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All times are listed in Chinese Standard Time. A unique Zoom webinar link will be sent to you two days before the event. 

Session Format

Each session lasts for an hour (30 minutes for the author, 15 minutes for the discussion, 15 minutes for participants’ Q&A).


Thursday, March 17, 2022

10:00 am–11:10 am

What Gets Measured Gets Managed: Investment and the Cost of Capital


Zhiguo He, Fuji Bank and Heller Professor of Finance and Jeuck Faculty Fellow, Booth School of Business, University of Chicago and Senior Fellow, ABFER

Discussant: Kjetil Storesletten, Richard and Beverly Fink Professor of Economics, Department of Economics, University of Minnesota

Session Chair: Michael Song, Professor, Department of Economics, Chinese University of Hong Kong and Senior Fellow, ABFER