Cash Signing Bonus and Labor Market Condition
37 Pages Posted: 4 Sep 2017
Date Written: September 3, 2017
Since 1998, increasing number of firms issue signing bonus to both internally and externally hired new CEOs. In 2012, about 35% new CEOs in general and 70% external hires received signing bonus. Among signing bonus usage, more than 60% uses cash only signing bonus. This paper studies the determinants of cash signing bonus and its relationship with the labor market conditions. We find that, controlling for other firm and CEO characteristics, the likelihood and the amount of cash signing bonus are positively correlated to CEOs’ outside job opportunities and negatively correlated to firms alternative choices. This suggests that the payment of cash signing bonus are resulted from labor market negotiations during the searching period. Cash signing bonus enables firms to beat other rivals in the labor market and to attract qualified candidates in the labor market.
Keywords: Executive Compensation, Outside Job Opportunity, Labor Market Condition
JEL Classification: G30, J33
Suggested Citation: Suggested Citation