Bonus Payments, Hierarchy Levels, and Tenure: Theoretical Considerations and Empirical Evidence
RWTH Aachen University - School of Economics and Business Administration; Institute for the Study of Labor (IZA)
University of Bonn - Economic Science Area; Institute for the Study of Labor (IZA)
April 1, 2012
Schmalenbach Business Review, Vol. 64, April 2012, pp. 101-124
We investigate two theoretical approaches that focus on bonuses as part of a firm’s long-term wage policy. The first approach argues that explicit bonuses serve as substitutes for implicit career concerns. The second claims that bonuses act as complements to an executive’s internal career. Our data show that throughout the whole chemical industry sector, bonus payments are mostly prevalent among the most senior executives and for management jobs rather than for jobs in research and development. The findings indicate that the two theoretical views are not mutually exclusive, but are both relevant in practice.
Number of Pages in PDF File: 24
Keywords: Bonuses, Career Concerns, Hierarchy Levels, Internal Careers, Tenure
JEL Classification: J31, J33, M51, M52
Date posted: April 14, 2012
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