Political Promotion, CEO Incentives, and the Relationship Between Pay and Performance

Xiaping Cao (), Michael Lemmon (), Xiaofei Pan (), Meijun Qian and Gary Tian ()
Additional contact information
Xiaping Cao: Lingnan College, Sun Yat-sen University, 510000 Guangzhou, China
Michael Lemmon: BlackRock, San Francisco, California 94102
Xiaofei Pan: University of Wollongong, Wollongong NSW 2500, Australia
Gary Tian: Macquarie University, North Ryde NSW 2019, Australia

Management Science, 2019, vol. 65, issue 7, 2947-2965

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.

Keywords: managerial incentives; political promotion; performance; CEO compensation (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (69)

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https://doi.org/10.1287/mnsc.2017.2966 (application/pdf)

Related works:
Working Paper: Political Promotion, CEO Incentives, and the Relationship between Pay and Performance (2011)
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