Chinese-style incentives: The intraindustry ripple effects of CEO awards

Yu Wu and Yingyi Hu

PLOS ONE, 2021, vol. 16, issue 6, 1-18

Abstract: Considering the background of traditional Chinese culture, which emphasizes that “when we see outstanding people, we should think of emulating them”, and social comparison theory, this study explores how CEO awards impact the R&D investment of award-winning CEOs’ competitors. The results show that award-winning CEOs’ competitors increase R&D investment in the postaward period relative to the preaward period. We further find that CEO awards’ “gold content”, the social attention of award-winning CEOs’ competitors, the similarity between award-winning CEOs and their competitors, and industry competitive pressure are important factors affecting the size of ripple effects. Empirical evidence also shows that the intraindustry ripple effects of CEO awards significantly improve the firm performance and value of competitors. In a robustness test, we confirm CEO awards’ intraindustry ripple effects from the perspective of the number of patent applications. The ripple effects of CEO awards are still valid after using PSM-DID to alleviate endogeneity problems and considering the right-side distribution of R&D investment.

Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:plo:pone00:0252860

DOI: 10.1371/journal.pone.0252860

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