Abstract
Although executives and workers all are the enterprise value creators, most research has focused on the study of executive compensation, and the wages of employees are less. Especially, there is little literature to study the salary problem of employees in product market competition environment. Using a sample of China’s listed firms from 2002 to 2014, we examine how product market competition influences firm worker’s pay. We find that market competition will strengthen employee wage, which results from market competition augment firm’s labor demand. At the same time we also find that the higher the competitive position of enterprises in the industry, the higher the wages. The evidence has an important implication for research on product market competition and corporate behavior and provides some useful suggestions for policy makers.
Highlights
Product market competition plays a significant role in influencing corporate strategies and internal governance mechanisms
Nickel (1996) [1] first analyzed the relationship between product market and labor market. They found that product market competition will increase the total social output and labor demand, enhance the bargaining power of wages, and improve the level of labor wages
We hypothesize that product market competition is associated with employee wage
Summary
Product market competition plays a significant role in influencing corporate strategies and internal governance mechanisms. Karuna’s (2007) [3] study found that enterprises in the strong competitive industries to provide a stronger incentive to executives, industry characteristics affect the incentive pay managers. Following these studies, we hypothesize that product market competition is associated with employee wage. Our study contributes to the literature in the following ways It adds to the literature on the effects of product market competition. Previous studies have mainly examined the effect of product market competition to executive compensation, ignoring the important influence of competition on ordinary employees’ wages.
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