Government's Say‐on‐pay Policy and Corporate Risk‐taking: Evidence from China

Kun Su, Haiyan Jiang and Gary Tian

Abacus, 2020, vol. 56, issue 4, 561-601

Abstract: This paper investigates whether the restriction on executive compensation in Chinese state‐owned enterprises (SOEs) imposed by the Government's say‐on‐pay schemes is conducive to corporate risk taking. Using a sample of listed SOEs over the period 2005–2018, we find that the restriction on executive compensation is negatively associated with corporate risk taking, suggesting that regulatory intervention in executive pay may produce unintended consequences. Our analyses also demonstrate that this negative regulatory effect on corporate risk taking is driven by listed SOEs in the growth stage of the business life cycle and by those in the provinces with a significant degree of government intervention. An additional test shows that the negative effect of the pay restriction on risk taking disappears in the SOEs in which managers hold shares, suggesting that an alignment of interests between managers and other shareholders mitigates the negative effect of the pay restriction. Our finding is robust to a batch of tests to alleviate the concerns about self‐selection and reverse causality.

Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1111/abac.12205

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:abacus:v:56:y:2020:i:4:p:561-601

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0001-3072

Access Statistics for this article

Abacus is currently edited by G.W. Dean and S. Jones

More articles in Abacus from Accounting Foundation, University of Sydney
Bibliographic data for series maintained by Wiley Content Delivery ().