Abstract
In today's digital era, digital transformation has become an essential strategic priority for enterprises. This study examines how local peer compensation affects enterprise digital transformation, using CEO compensation data from Chinese listed companies between 2010 and 2019. Our research emphasizes the crucial role of local tournament incentives in advancing enterprise digitalization, primarily by enhancing digital investment and reducing financial constraints. Additionally, we find stronger positive effects in non-state-owned enterprises, high-risk-taking enterprises, enterprises with long-serving CEOs, and enterprises whose CEOs are not near retirement age. These findings suggest competition among CEOs for higher compensation in neighboring businesses drives digitalization within enterprises.
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