Limits on executive pay and stock price crash risk: Evidence from a quasi-natural experiment

Bai, Min; Wang, Renxiang; Yu, Chia‐Feng; Zheng, Jun

doi:10.1016/j.pacfin.2019.04.003

Cited by 12 publications

(7 citation statements)

References 45 publications

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“…The pay level of employees in SOEs in China is too high compared to private enterprises, the mobility of employees in state-owned enterprises is poor, and the degree of labor market constraints is low. Previous studies have shown that high wages are due to the excessive welfare of employees in SOEs ( Bai et al, 2019 ; Jian et al, 2020 ; Kong et al, 2020 ), an important factor in aggravating the low efficiency of SOEs and is inconsistent with the basic assumptions of the efficiency-wage theory.…”

Section: Hypothesis Developmentmentioning

confidence: 93%

“…Since the local SASACs followed up the employee compensation restriction policy in 2010, employee compensation in central and local SOEs are both limited, while private enterprises are not affected by the change in this policy. Drawing on existing studies related to the evaluation of compensation control policies ( Bai et al, 2019 ), we use SOEs as the experimental group and private enterprises as the control group in a quasi-natural experiment. A shorter sample period can minimize the interference of other factors unrelated to the pay restriction policy in the empirical setting.…”

Section: Data Variables and Methodologymentioning

confidence: 99%

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The impact of employee compensation restrictions on labor productivity in state-owned enterprises: Evidence from China

Zhu

2022

Front. Psychol.

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Employees are important stakeholders in an organization. This paper aims to examine the effectiveness of limits on employee compensation in state-owned enterprises (SOEs), a policy for employees of state-owned enterprises issued by the China State-owned Assets Supervision and Administration Commission (SASAC) in 2010. Employing a difference-in-differences analysis for a sample of Chinese listed companies from 2007 to 2013, the results show that employee compensation restriction enhances the labor productivity of SOEs. This policy effect is mainly due to the contribution of compensation limits to the external fairness of employee compensation, and the findings remain unchanged after a series of robustness testing procedures. In addition, the employee compensation restriction policy significantly affects labor productivity improvement in monopolistic industries or mature SOEs.

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Section: Hypothesis Developmentmentioning

confidence: 93%

Section: Data Variables and Methodologymentioning

confidence: 99%

The impact of employee compensation restrictions on labor productivity in state-owned enterprises: Evidence from China

Zhu

2022

Front. Psychol.

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“…According to prior studies on crash risk (e.g., Jia, 2018;Ben-Nasr & Ghouma, 2018;Bai et al, 2019), this study employs three measures as dependent variables based on the weekly stock return for each firm on the current week and two weeks forward and backward estimated as residuals from using the following market model (Jin & Myers, 2006;Jia, 2018):…”

Section: Stock Price Crash Riskmentioning

confidence: 99%

تأثیر هیکل الدیون على مخاطر إنهیار أسعار الأسهم المستقبلیة: أدلة من مصر( باللغة الإنجلیزیة)

السيد¹

2021

مجلة الاسکندریة للبحوث المحاسبیة

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The main objective of the study is to determine the extent impact of debt structure proxies on future stock price crash risk and its different measures in order to mitigate stock price crash risk and help investors to understand better crash risk consequences and modify their investing behavior. Additionally, it is a guide for regulators to better achieve the credit market and to create an intact credit protection system. The study was conducted on a sample of ( 13) firms representing (40.6%) of the total number of the real estate sector firms listed in the Egyptian Stock Exchange during the period from 2013 to 2019.The empirical results concluded that firms with high each of trade credit ratio, net trade credit ratio, trade credit to bank credit ratio, and debt structure characteristics have a lower stock price crash risk which was measured as negative conditional skewness of weekly returns, down-to-up volatility, and aggregate stock price crash risk. As for the control variables namely average weekly returns, financial leverage, and return on total assets were negatively significant for all three measures of stock price crash risk. Whilst, the firm size was a positively significant impact on stock price crash risk. While the study indicated that there was an insignificant impact of the bank credit ratio and the control variables namely investor heterogeneity, returns volatility, and market-to-book ratio on stock price crash risk measures in the future. The study also presented valuable recommendations to increase the different monitoring roles of the debt structure proxies in decreasing opportunistic behaviors and alleviating the likelihood of future stock price crash risk in Egypt which finally leads to rationalizing stakeholders' decisions.

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“…Consequently, we expect the impact of GSOP on GI to be more significant for local- The current study enhances our understanding of the factors influencing environmental performance and contributes to the literature in the following ways. First, our study adds value to the expanding body of literature on the causes and effects of GSOP (Bai et al, 2019;Jiang et al, 2021;Jiang & Zhang, 2018). Our research diverges from existing studies by specifically examining the environmental ramifications of GSOP, in contrast to the predominant focus on the economic effects.…”

Section: Introductionmentioning

confidence: 97%

“…Hence, one could plausibly argue that placing limitations on high‐level executive compensation could have negative effects on environmental performance. Moreover, the existing literature on restrictions on executive compensation suggests that limitations on top executives' pay can have a detrimental impact on their willingness to take risks, financial performance, corporate social responsibility (Jiang et al, 2021; Jiang & Zhang, 2018; Su et al, 2020), and the risk of a sudden drop in firms' stock prices (Bai et al, 2019). The primary focus of these studies has revolved around examining the impacts of “say‐on‐pay” policies enforced by the government (GSOP), particularly concerning economic and social consequences.…”

Section: Introductionmentioning

confidence: 99%

Nexus between government surveillance on executive compensation and green innovation: Evidence from the type of state‐owned enterprises

Li,

Maqsood,

Zahid

2023

Business Ethics Env & Resp

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The Chinese government capped executive compensation in state‐owned enterprises (SOEs) to address income inequality and promote a more equitable distribution of wealth. This study investigates whether regulating top executives' pay alters their motivation for corporate green innovation (GI) initiatives. Using data from 2006 to 2018 for Chinese‐listed SOEs, the regression analysis and difference‐in‐difference methods revealed that government restrictions on executive compensation negatively affect GI. Furthermore, the types of SOE results show that the negative effect of pay restrictions on GI exists only in local SOEs, as opposed to central SOEs. Moreover, high managerial shareholding positively moderates this negative effect, demonstrating that the adverse effects of compensation restrictions are mitigated by the convergence of interests between managers and stakeholders. These findings are robust to instrumental variables and other robustness tests. This study provides policy recommendations for the government to boost its assistance in GI and establish new environment‐related incentives that motivate managers to promote GI and inspire enterprises to deploy sustainable environmental initiatives.

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Limits on executive pay and stock price crash risk: Evidence from a quasi-natural experiment

Cited by 12 publications

References 45 publications

The impact of employee compensation restrictions on labor productivity in state-owned enterprises: Evidence from China

The impact of employee compensation restrictions on labor productivity in state-owned enterprises: Evidence from China

تأثیر هیکل الدیون على مخاطر إنهیار أسعار الأسهم المستقبلیة: أدلة من مصر( باللغة الإنجلیزیة)

Nexus between government surveillance on executive compensation and green innovation: Evidence from the type of state‐owned enterprises

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