Digital transformation and the impact of local tournament incentives: Evidence from publicly listed companies in China

Zesu Hua and Yihua Yu ()

Finance Research Letters, 2023, vol. 57, issue C

Abstract: In today's digital era, digital transformation has become an essential strategic priority for enterprises. This study examines how local peer compensation affects enterprise digital transformation, using CEO compensation data from Chinese listed companies between 2010 and 2019. Our research emphasizes the crucial role of local tournament incentives in advancing enterprise digitalization, primarily by enhancing digital investment and reducing financial constraints. Additionally, we find stronger positive effects in non-state-owned enterprises, high-risk-taking enterprises, enterprises with long-serving CEOs, and enterprises whose CEOs are not near retirement age. These findings suggest competition among CEOs for higher compensation in neighboring businesses drives digitalization within enterprises.

Keywords: Local tournament incentives; CEO compensation; Digital transformation; Enterprise software; Financial constraints (search for similar items in EconPapers)
JEL-codes: G30 G31 G34 J31 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:57:y:2023:i:c:s1544612323005767

DOI: 10.1016/j.frl.2023.104204

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