China’s Closed Pyramidal Managerial Labor Market and the Stock Price Crash Risk

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review

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Detail(s)

Original languageEnglish
Pages (from-to)105-131
Journal / PublicationThe Accounting Review
Volume93
Issue number3
Online publishedJul 2017
Publication statusPublished - May 2018

Abstract

Managers of China’s state-owned firms work in a closed pyramidal managerial labor market. They enjoy non-transferable benefits if they choose to stay within this system. The higher up are they in this labor market hierarchy (their political ranks), the fewer are their outside employment opportunities. Due to career and wealth concerns, they are cautious and risk-averse when managing firms. We examine the effect of managers’ political ranks on firms’ stock price crash risk and find a negative association. This association mainly exists in firms with younger managers and managers with shorter tenure. Further, this effect is only significant in regions with weak market forces, in firms without foreign investors, without political connections, and during periods with no local government leaders’ or managers’ political promotions. We conclude that the political ranking system reduces the stock price crash risk.

Research Area(s)

  • internal labor market, political ranks, stock price crash risk, china

Bibliographic Note

Research Unit(s) information for this publication is provided by the author(s) concerned.

Citation Format(s)

China’s Closed Pyramidal Managerial Labor Market and the Stock Price Crash Risk. / Chen, Donghua; Kim, Jeong-Bon; Li, Oliver Zhen; Liang, Shangkun.

In: The Accounting Review, Vol. 93, No. 3, 05.2018, p. 105-131.

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review