Executive Compensation Limits and Executive Turnover

• 成果类型: Article
• 署名作者: Nanda, Vikram; Silveri, Sabatino (Dino); Wang, Kun; Zhao, Le
• 署名单位: University of Texas System; University of Texas Dallas; University of Memphis; West Virginia University; Tsinghua University; Nankai University; Nankai University
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2023.4812
• 发表日期: 2024
• 页码: 2382-2405
• 关键词: Executive compensation; ceo compensation; managerial incentives; corporate governance; turnover; regulation; Pay-for-performance

摘要

We explore the consequences of limiting executive pay on voluntary executive turnover by exploiting a Chinese government policy restricting executive pay at a subset of firms. Affected firms experience an increase in voluntary executive turnover, with executives increasingly moving to firms not bound by the pay policy. Executives that leave are of higher quality as suggested by their stronger stock and accounting performance in the year prior to the turnover. Affected firms suffer firm value losses, especially when talented executives leave. Our findings demonstrate the importance of compensation contracts in retaining executives and suggest a need for regulatory caution, since mandated constraints aimed at trying to fix executive pay can hurt firm value and ultimately, hurt shareholders.