Cash Signing Bonus and Labor Market Condition

37 Pages Posted: 4 Sep 2017

See all articles by Xiaoxiao He

Xiaoxiao He

City University of Hong Kong (CityU)

Margaret Rui Zhu

The Chinese University of Hong Kong (CUHK)

Date Written: September 3, 2017

Abstract

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

He, Xiaoxiao and Zhu, Margaret Rui, Cash Signing Bonus and Labor Market Condition (September 3, 2017). Available at SSRN: https://ssrn.com/abstract=3031681 or http://dx.doi.org/10.2139/ssrn.3031681

Xiaoxiao He

City University of Hong Kong (CityU) ( email )

83 Tat Chee Avenue
Kowloon
Hong Kong

Margaret Rui Zhu (Contact Author)

The Chinese University of Hong Kong (CUHK) ( email )

Shatin, N.T.
Hong Kong
Hong Kong
+852 3943 3216 (Phone)

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