China's Closed Pyramidal Managerial Labor Market and the Stock Price Crash Risk

• 成果类型: Article
• 署名作者: Chen, Donghua; Kim, Jeong-Bon; Li, Oliver Zhen; Liang, Shangkun
• 署名单位: Nanjing University; City University of Hong Kong; University of Waterloo; National University of Singapore; Shanghai Lixin University of Accounting & Finance; Central University of Finance & Economics
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/accr-51867
• 发表日期: 2018
• 页码: 105-131
• 关键词: CORPORATE GOVERNANCE; conditional skewness; enterprise reform; incentives; COMPENSATION; tournaments; FEDERALISM; FIRMS; CEOS

摘要

Managers of China's state-owned firms work in a closed pyramidal managerial labor market. They enjoy non-transferable benefits if they choose to stay within this system. The higher up are they in this labor market hierarchy (their political ranks), the fewer are their outside employment opportunities. Due to career and wealth concerns, they are cautious and risk-averse when managing firms. We examine the effect of managers' political ranks on firms' stock price crash risk and find a negative association. This association mainly exists in firms with younger managers and managers with shorter tenure. Further, this effect is only significant in regions with weak market forces, in firms without foreign investors, without political connections, and during periods with no local government leaders' or managers' political promotions. We conclude that the political ranking system reduces the stock price crash risk.