The impact of pay on CEO turnover: A test of two perspectives

Wei Shen, Richard J. Gentry and Henry L. Tosi

Journal of Business Research, 2010, vol. 63, issue 7, 729-734

Abstract: We investigate the impact of pay on CEO turnover from two perspectives. One is managerial power perspective that focuses on power in the setting of CEO pay. The other is tournament theory that treats CEO pay as a top prize designed to motivate executives to work hard for the top position. Building on research that highlights the impact of power dynamics at the top of the firm on CEO turnover, we propose that managerial power perspective suggests a negative impact of CEO pay on CEO turnover, while tournament theory suggests a positive impact. Using data from a sample of 313 large U.S. companies from 1988 to 1997, we find that both the level of CEO pay and its ratio over the average pay of the firm's four other highest paid executives have a negative impact on CEO turnover.

Keywords: Executive; pay; Executive; turnover; Managerial; power; Tournament; theory (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (14)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbrese:v:63:y:2010:i:7:p:729-734

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