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Nonexecutive employee compensation and firm labor productivity

Author

Listed:
  • Zhao, Minghui
  • Fong, Kwong Yee
  • Leong, Wai Nga
  • Li, Qiu
  • Chen, Rujie

Abstract

This study examined the impact of nonexecutive employee compensation on labor productivity. We explored how organizational empowerment dimensions and industry characteristics shape this relationship based on data from Chinese-listed firms from 2012 to 2021. Compensation effectiveness varied across productivity levels and industries, with stronger effects at lower-productivity levels. Industry heterogeneity analysis indicates that technology-intensive sectors had enhanced compensation–productivity relationships, while labor- and asset-intensive industries exhibited weaker effects. Management capability, organizational resilience, and digitalization positively moderated this relationship. These findings highlight that the effectiveness of compensation strategies is significantly affected by organizational context and industry characteristics. This study augments compensation theory by identifying key boundary conditions in the compensation–productivity relationship, providing practical guidance for creating effective compensation strategies across organizational contexts.

Suggested Citation

  • Zhao, Minghui & Fong, Kwong Yee & Leong, Wai Nga & Li, Qiu & Chen, Rujie, 2025. "Nonexecutive employee compensation and firm labor productivity," Finance Research Letters, Elsevier, vol. 73(C).
    • Handle: RePEc:eee:finlet:v:73:y:2025:i:c:s1544612324017070
    DOI: 10.1016/j.frl.2024.106678
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    More about this item

    Keywords

    Employee compensation; Labor productivity; Organizational empowerment; Management capability; Organizational resilience; Digitalization;
    All these keywords.

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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