How Can the Sustainable Motivational Effect of Equity Incentives on Corporate Performance Be Exploited?—A Study Based on the Moderating Effect of Aspiration Level

Lu Tang, Shihan Zhang, Chenhui Ding () and Jinyao Huan
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Lu Tang: Business School, Hohai University, Nanjing 211100, China
Shihan Zhang: College of Business Administration, Zhejiang Gongshang University, Hangzhou 310018, China
Chenhui Ding: Business School, Hohai University, Nanjing 211100, China
Jinyao Huan: College of Business Administration, Zhejiang Gongshang University, Hangzhou 310018, China

Sustainability, 2022, vol. 14, issue 24, 1-17

Abstract: How equity incentives affect corporate performance has become a consensus. However, the question of how to maximize the sustainable incentive effect of equity incentives on corporate performance and avoid “short-sighted” behavior under equity incentives has not yet been resolved. This research re-examines the sustainable incentive of equity incentives and examines the moderating role of aspiration levels based on the behavioral theory of the firm and the prospect theory. Applying panel data comprised 9588 observations from Chinese A-share listed companies spanning the period from 2011 to 2019, this study found that there is an inverted U-shaped relationship between equity incentives and corporate performance. Aspiration surplus negatively moderates the curvilinear inverted U-shaped relationship. As the level of aspiration surplus changes from low to high, the curvilinear relationship between equity incentives and corporate performance is weakened. Aspiration loss positively moderates the curvilinear inverted U-shaped relationship. As the level of aspiration loss changes from low to high, the curvilinear relationship between equity incentives and corporate performance is enhanced. This study demonstrates the importance of aspiration level between equity incentives and corporate performance, guiding firms to focus on the implementation scenario as an influencing factor in order to improve the sustainable incentive effect of equity incentives.

Keywords: sustainable incentives; aspiration surplus; aspiration loss; equity incentive; corporate governance (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2022
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