Non-CEO executives' intraorganizational competition incentives and corporate labour investment efficiency
Non-CEO executives' intraorganizational competition incentives and corporate labour investment efficiency
This study examines the impact of non-Chief Executive Officer (non-CEO) executives' intraorganizational promotion-based incentives, also known as tournament incentives, on corporate labour investment efficiency. We find that tournament incentives lead to inefficient labour investment, measured as the absolute deviation from optimal net hiring warranted by firm fundamentals. This positive relationship is weakened when non-CEO executives are less eager to compete in the tournament. Mediating analysis demonstrates that reduced team cohesion, captured by non-CEO executive turnover, mediates the relationship between tournament incentives and labour investment inefficiency. Our evidence is consistent with the dysfunctional view of tournament incentives and highlights the importance of non-CEO executives' incentives in corporate labour investment.
Labor investment, Non-CEO executives, Tournament incentives, labour investment, tournament incentives, non-CEO executives
Li, Zhe
78ca3dc7-28e3-4c71-9756-9d01e56601ef
Wang, Bo
dc1fccae-55e8-4d28-8eb9-1c539247e940
Li, Zhe
78ca3dc7-28e3-4c71-9756-9d01e56601ef
Wang, Bo
dc1fccae-55e8-4d28-8eb9-1c539247e940
Li, Zhe and Wang, Bo
(2023)
Non-CEO executives' intraorganizational competition incentives and corporate labour investment efficiency.
European Financial Management.
(doi:10.1111/eufm.12463).
(In Press)
Abstract
This study examines the impact of non-Chief Executive Officer (non-CEO) executives' intraorganizational promotion-based incentives, also known as tournament incentives, on corporate labour investment efficiency. We find that tournament incentives lead to inefficient labour investment, measured as the absolute deviation from optimal net hiring warranted by firm fundamentals. This positive relationship is weakened when non-CEO executives are less eager to compete in the tournament. Mediating analysis demonstrates that reduced team cohesion, captured by non-CEO executive turnover, mediates the relationship between tournament incentives and labour investment inefficiency. Our evidence is consistent with the dysfunctional view of tournament incentives and highlights the importance of non-CEO executives' incentives in corporate labour investment.
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Accepted/In Press date: 4 October 2023
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© 2023 The Authors. European Financial Management published by John Wiley & Sons Ltd.
Keywords:
Labor investment, Non-CEO executives, Tournament incentives, labour investment, tournament incentives, non-CEO executives
Identifiers
Local EPrints ID: 483050
URI: http://eprints.soton.ac.uk/id/eprint/483050
ISSN: 1354-7798
PURE UUID: d2beb1fb-cf79-46e3-9960-45172bb711c8
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Date deposited: 20 Oct 2023 16:50
Last modified: 18 Mar 2024 04:04
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Author:
Zhe Li
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