CEO Succession, Promotion Incentives And Firm Performance

With the continuously reform and opening, the continuous improvement of the companysystem and national regulations, increasingly active external market promotes the rapiddevelopment of China’s enterprises, but the enterprises also face more intense competition. Ineach competition, the most critical is the high-end management talent competition. In recentyears, the research based on executive incentive mechanism always is the important issue ofscholars from various countries. There are two distinct incentive mechanisms in mostcorporations: performance-based incentives and promotion-based tournament incentives.Promotion-based tournament incentives have received scant attention, the existing researchesis even fewer on the specific application environment of promotion incentives.This paper selects the Chinese A-share listed companied from2009to2011as samples,its research foundation is based on the tournament theory and incentive theory. This paperintroduces a variable of CEO succession to testify the impact of CEO succession on positiverelationship between Promotion incentives and firm performance based on the institutionalsituation of China. The conclusion from the empirical study comes to two points: First, theturnover of CEO plays the weakening effect on the positive relationship between promotionincentives and enterprise performance; second, the external successors further weaken theeffect on the positive relationship between promotion incentives and enterprise performance.The conclusions are not only provided a new thought and research direction for design ofcompensation system in China, but also provided some basis for research on executives’promotion decision and staff management.