" The Strategy of Talented Persons Powering the Nation” has become a basic strategy for China’s economic and social development. Talents are not only important to improving China’s competitiveness and comprehensive strength, but also related to the development of enterprises. As the senior management talent of enterprises, the CEO directly affects the stability of the senior management team and the competitiveness of enterprises. However, there is little literature that explores the impact of CEO voluntary turnover from the perspective of non-compensation incentives at present, particularly in terms of CEO promotion incentives. When there are both compensation incentives （monetary compensation incentives） and non-compensation incentives （promotion incentives）, which incentives are more effective? This question has not been clearly answered in previous literature studies. Therefore, it is of great theoretical and practical significance to explore how to retain CEO talents. On the basis of the data of Chinese listed companies, this paper is based on the manager market theory and the theory of contract reference point for the first time. By sorting out relevant data manually including CEO promotion, CEO voluntary turnover, CEO characteristic variables and so on, this paper uses the multiple regression analysis to empirically explore the impact of monetary compensation incentives and promotion incentives on CEO voluntary turnover from the perspective of the multi-dimensional compensation reference point effect, and uses the two-stage regression analysis of instrumental variables to solve endogenous problems. At the same time, this paper uses the multiple regression analysis to explore the impact of factors such as political promotion, property and salary fluctuations on CEO voluntary turnover in the further research. Finally, the accuracy of the research conclusions is verified by various robustness tests. The results of empirical studies indicate that both monetary compensation incentives and promotion incentives can inhibit CEO voluntary turnover. However, when both incentives exist simultaneously, promotion incentives have a stronger inhibitory effect on CEO voluntary turnover. When the CEO compensation is lower than the reference point compensation in the previous period, more prone the CEO is to voluntarily turnover in this period. When there is a multi-dimensional compensation reference point effect, compensation incentives and promotion incentives can still inhibit CEO voluntary turnover. However, when the two incentive modes exist simultaneously, the inhibition of compensation incentives on CEO voluntary turnover is more significant under the external reference point effect, while the inhibition of promotion incentives on CEO voluntary turnover is more significant under the individual reference point effect. The further research finds that compared with non-state-owned enterprises, promotion incentives of state-owned enterprises can inhibit CEO voluntary turnover more effectively. After considering the impact of endogenous problems, the above conclusions are still established. This paper has the following revelations: First, we should adopt different methods of incentives to retain CEO talents. We must pay attention not only to the role of monetary compensation incentives in retaining talents, but also to the supplement and effects of promotion incentives when monetary compensation incentives are insufficient. Second, we should strengthen the understanding of the multi-dimensional compensation reference point effect. We must fully understand CEO voluntary turnover from the perspective of the multi-dimensional reference point effect at present, and take effective incentives based on specific reasons for the CEO’s resignation. Third, we should pay attention to the role of compensation incentives in the reform of the compensation system of state-owned enterprises. It is recommended to combine short-term monetary compensation incentives with long-term equity incentives. This paper has the following contributions: （1） It expands the research on the reference point effect, and considers the impact of the multi-dimensional salary reference point such as the external reference point, the internal reference point and the personal reference point on CEO voluntary turnover. （2） It enriches the research of the manager market theory. （3） It deepens the understanding on how to retain talents effectively, providing theoretical and empirical support for how to choose effective incentives and formulate policies of gaining CEO talents.
“High Officials” or “High Compensations”：Which One is More Likely to Retain Talents?
Journal of Finance and Economics Vol. 45, Issue 02, pp. 126 - 138 (2019) DOI:10.16538/j.cnki.jfe.2019.02.010
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Cite this article
Luo Kun, Lian Yanling, Zhang Xuan. “High Officials” or “High Compensations”：Which One is More Likely to Retain Talents?[J]. Journal of Finance and Economics, 2019, 45(2): 126-138.
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