Local tournament incentives and labor investment efficiency

Chun Mei and Mingmao Deng

Finance Research Letters, 2025, vol. 74, issue C

Abstract: This paper investigates the effect of CEO local tournament incentives (CLTI) on firms’ labor investment efficiency (LIE). Using data from Chinese listed companies form 2005 to 2023, we find a positive association between CLTI and LIE. Our results remain robust when employing alternative proxies for CLTI and LIE, as well as in endogeneity tests. Additionally, we observe that CLTI mitigates both labor overinvestment (underfiring) and labor underinvestment (underhiring). Cross-sectional analysis reveals that this relationship is more pronounced in non-state-owned firms and those located in eastern China. Overall, our findings suggest that regional competition among CEOs for higher compensation plays a pivotal role in shaping labor investment decisions.

Keywords: Local tournament incentives; Labor investment efficiency; Labor overinvestment; Labor underinvestment (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1544612324017239
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:74:y:2025:i:c:s1544612324017239

DOI: 10.1016/j.frl.2024.106694

Access Statistics for this article

Finance Research Letters is currently edited by R. Gençay

More articles in Finance Research Letters from Elsevier
Bibliographic data for series maintained by Catherine Liu ().