Executive Incentives and Corporate Risk Taking
DOI:
https://doi.org/10.53469/jsshl.2024.07(02).09Keywords:
Equity incentives, Compensation incentives, Risk takingAbstract
Risk-taking is a fundamental driving force for long-term sustainable economic growth, can corporate risk-taking be enhanced through executive incentives and how to adjust the level of corporate risk-taking? This paper utilizes data from 1886 Shanghai and Shenzhen A-share listed companies from 2010 to 2021, and conducts an empirical analysis by using fixed-effects model panel regression. This paper compares the effects of compensation incentives, equity incentives, and the simultaneous implementation of both incentives on the level of corporate risk-taking, and finds that equity incentives, as a long-term incentive, can significantly enhance corporate risk-taking compared to compensation incentives and the simultaneous implementation of both incentives. Further analysis reveals that equity incentives increase risk-taking by affecting selling expenses, but have no significant effect on administrative expenses and operating costs. Therefore, effective incentives can bring real benefits and create substantial value for enterprises. This paper provides a theoretical reference for the strategic planning and sustainable development of listed companies.
References
Su Kun. Research on Economic Consequences of Corporate Risk Taking--Based on the Perspective of Debt Maturity Structure[J]. Modern Management Science,2016(06):57-59.
Zhou Binrui,Liu Xiliang,Zhang Lin. Monetary policy shocks, financial marketization reform and corporate risk-taking[J]. World Economy,2017,40(10):93-118.
He Weifeng,Liu Yijun,Wu Yuyu. Research on equity pledge of major shareholders and corporate risk taking[J]. China Soft Science,2018,(05):110-122.
Ma Y.Q., Qiu Y., Jin Z. CEOs' poor origins and corporate innovation: poor people's ambition or poor people's desire for change? [J]. Economic Management,2019,41(12):88-104.
Du Shanzhong,Ma Lianfu. Research on the impact of chain shareholders on corporate risk taking[J]. Journal of Management,2022,19(01):27-35.
Ma Qingbo,Tian Xunhao,Hu Yuanlin. Can corporate reputation enhance the level of corporate risk-taking? [J]. Investment Research,2022,41(02):139-160.
ZHOU Zezhong,MA Jing,HU Liufen. Research on risk compensation effect in the design of executive compensation incentive system[J]. China Industrial Economy,2018,(12):152-169.
Leng Xuelui,Chen Pengcheng,Lin Lulu. Equity incentives, their contractual elements and corporate risk taking[J]. Finance Theory and Practice,2022,(07):84-97.
Li Xiaorong,Zhang Ruijun. Equity Incentives Affect Risk Taking:Agency Cost or Risk Aversion? [J]. Accounting Research,2014,(01):57-63+95.
Liang Quanxi,Zhan Xuesi. Management Equity Incentives, Equity Separation Reform and Corporate Risk Taking[J]. Journal of Zhongnan University of Economics and Law,2016,(06):143-152.
B. Wang,J. Huang,J. Lv. Do equity incentives affect operating leverage decisions? --Based on empirical evidence from A-share listed companies[J]. Journal of Central University of Finance and Economics,2021,(09):59-71.
Qiu Xuelin,Liu Hao. Executive performance incentives, managerial competence and corporate performance[J]. Finance and accounting newsletter,2019,(30):25-28.
Ning Xu,Yingjie Bai,Di Zhang. How can equity incentives help enterprises' digital transformation? --An Analysis of Text Mining Based on Annual Reports of Listed Companies[J]. Finance and Economics, 2023,(07):89-101.