Pay inequalities and managerial turnover

Jayant R. Kale, Ebru Reis and Anand Venkateswaran

Journal of Empirical Finance, 2014, vol. 27, issue C, 21-39

Abstract: We study how pay inequalities affect (i) a firm's rate of voluntary non-CEO manager (VP) VP resignations, and (ii) the likelihood that an individual VP will voluntarily resign. We consider pay inequalities that a VP faces relative to (i) the CEO in her own firm, (ii) other VPs in the firm, and (iii) VPs in benchmark firms. We use a unique hand-collected dataset of over 1000 voluntary managerial resignations and find that pay inequality is an important determinant of managerial turnover. We find that managers are more likely to resign when their pay relative to their peers in the firm and outside the firm is lower; and firms with greater levels of pay inequality and greater pay inequality relative to benchmark firms experience higher VP turnover.

Keywords: Managerial incentives; Tournaments; Executive compensation; Turnover (search for similar items in EconPapers)
JEL-codes: G34 J33 L14 M51 M52 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:empfin:v:27:y:2014:i:c:p:21-39

DOI: 10.1016/j.jempfin.2013.11.002

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