Executive Compensation and Corporate Financial Leverage: Empirical Evidence from Listed Companies in China

Xingyi Qiu ()
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Xingyi Qiu: HOHAI University, Business School

A chapter in Proceedings of the 2025 5th International Conference on Informatization Economic Development and Management (IEDM 2025), 2025, pp 137-150 from Springer

Abstract: Abstract As capital markets evolve, financial leverage has become a critical factor in managing risk and ensuring long-term growth for companies. Executive compensation, a vital aspect of corporate governance, significantly influences financial decisions, risk-taking, and capital structure adjustments. This study empirically examines how executive compensation affects corporate financial leverage under China’s “Deleveraging Policy”, using data from non-financial state-owned and private A-share listed companies between 2015 and 2023. The analysis reveals a strong negative relationship, showing that higher executive compensation reduces financial leverage by encouraging practices like repaying debt and increasing internal and equity financing. The findings are robust, with additional tests confirming the results. Heterogeneity analysis indicates that the impact is more pronounced in state-owned and larger companies. These findings highlight the importance of aligning executive pay with long-term financial stability and sustainability.

Keywords: Executive Compensation; Financial Leverage; Enterprise Risk Management; Capital Structure; Deleveraging Policy (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:spr:advbcp:978-94-6463-724-3_14

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DOI: 10.2991/978-94-6463-724-3_14

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