Political promotion, CEO incentives, and the relationship between pay and performance

Xiaping Cao, Michael Lemmon, Xiaofei Pan, Meijun Qian, Gary Tian

Research output: Contribution to journalArticle

16 Citations (Scopus)

Abstract

Both theory and empirical evidence suggest that managers’ career concerns can serve as an important source of implicit economic incentives. We examine how incentives for political promotion are related to compensation policy and firm performance in Chinese state-owned enterprises. We find that the likelihood that the CEO receives a political promotion is positively related to firm performance. We also find that CEOs with a higher likelihood of political promotion have lower pay levels and lower pay–performance sensitivity. Overall, the evidence suggests that competition in the political job market helps mitigate weak monetary incentives for CEOs in China.
Original languageEnglish
Pages (from-to)2947-2965
Number of pages19
JournalManagement Science
Volume65
Issue number7
Early online date2018
DOIs
Publication statusPublished - Jul 2019

Keywords

  • managerial incentives
  • political promotion
  • performance
  • CEO compensation

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