How Supervision Failures Lead to Quality Risk of Land Trusteeship Services: A Principal–Agent Theory Perspective

The service quality of land trusteeship is often subpar due to farmers’ ineffective supervision of service providers’ opportunistic behaviors. However, the existing literature has not given much attention to this agency issue from the principal–agent theory. Accordingly, this paper analyzes the mechanism of supervision failure leading to the quality risk of land trusteeship services, then applies the IV-Heckman model to empirically test the impact with follow-up survey data of 1138 farmers in China. The study found that: (1) supervision failure has a positive impact on the quality risk of land trusteeship services. The OLS model overestimated the main effect of supervision failure by 23%, while the Heckman model effectively corrected the sample selectivity bias. (2) The results of heterogeneity analysis showed that the effect of supervision failure on the quality risk of different crop types is in the order of cash crops, corn, and wheat. The impact of supervision failure on quality risk in different links is single-link, multi-link, and full-link in that order. (3) The quantile regression shows that the higher the level of quality risk is, the deeper the impact of supervision failure on the quality risk of land trusteeship services is. Accordingly, this paper proposes the following policy insights. First, a sound regulatory mechanism for land trusteeship services should be established. Second, increase the punishment for land trusteeship services violations. Third, establish a digital supervision platform to supervise and evaluate the service process and quality.