Managerial Incentives and Voluntary Turnover
45 Pages Posted: 16 Feb 2009 Last revised: 2 Dec 2014
Date Written: February 15, 2009
We study the issue to managerial retention by examining the relation between managerial incentives and voluntary turnover. Our analysis uses a unique dataset which comprises of over 3,000 managerial turnovers about a third of which are voluntary. We find that firms that have a higher inequality in their compensation schemes are more likely to experience higher resignations. We also find that managers take into account their compensation relative to their peers within the firm as well as those in the market, in their resignation decisions. The likelihood of resignations is also affected by the mix of short-term and long-term compensation, equity ownership in the firm, and the overall level of compensation inequality among top executives.
Keywords: Managerial Incentives, Tournaments, Executive Compensation, Turnover
JEL Classification: G34, G35, J33, L14, L35
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