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

Journal Article


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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.

UOW Authors


  •   Cao, Xiaping (external author)
  •   Lemmon, Michael (external author)
  •   Pan, Xiaofei
  •   Qian, Meijun (external author)
  •   Tian, Gary G. (external author)

Publication Date


  • 2019

Citation


  • Cao, X., Lemmon, M., Pan, X., Qian, M. & Tian, G. (2019). Political promotion, CEO incentives, and the relationship between pay and performance. Management Science, 65 (7), 2947-3448.

Scopus Eid


  • 2-s2.0-85065548102

Ro Full-text Url


  • https://ro.uow.edu.au/cgi/viewcontent.cgi?article=2561&context=buspapers

Ro Metadata Url


  • http://ro.uow.edu.au/buspapers/1543

Has Global Citation Frequency


Number Of Pages


  • 501

Start Page


  • 2947

End Page


  • 3448

Volume


  • 65

Issue


  • 7

Place Of Publication


  • United States

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.

UOW Authors


  •   Cao, Xiaping (external author)
  •   Lemmon, Michael (external author)
  •   Pan, Xiaofei
  •   Qian, Meijun (external author)
  •   Tian, Gary G. (external author)

Publication Date


  • 2019

Citation


  • Cao, X., Lemmon, M., Pan, X., Qian, M. & Tian, G. (2019). Political promotion, CEO incentives, and the relationship between pay and performance. Management Science, 65 (7), 2947-3448.

Scopus Eid


  • 2-s2.0-85065548102

Ro Full-text Url


  • https://ro.uow.edu.au/cgi/viewcontent.cgi?article=2561&context=buspapers

Ro Metadata Url


  • http://ro.uow.edu.au/buspapers/1543

Has Global Citation Frequency


Number Of Pages


  • 501

Start Page


  • 2947

End Page


  • 3448

Volume


  • 65

Issue


  • 7

Place Of Publication


  • United States