Dr Jane Luo, together with co-authors Dr Huasheng Gao and Dr Tilan Tang, has recently published a research article titled “Effects of managerial labor market on executive compensation: Evidence from job-hopping” in the Journal of Accounting and Economics. This journal is one of the top three accounting journals in the world.
The article identifies that companies dramatically raise their incumbent executives’ pay, especially equity-based pay, after losing executives to other firms. The pay raise is larger when incumbent executives have greater employment mobility in the labor market, when companies lose senior executives, and when job-hopping executives receive favorable job offers in their new firms. A company׳s subsequent pay raise to incumbent executives after losing an executive diminishes its deficiency in executive compensation relative to its industry peer firms, and is effective at retaining its incumbent executives. Overall, the evidence suggests that executive job-hopping activity has significant effects on firms’ compensation policies.