Hedging by Hiring: Executive Composition and Compensation, Responses to Adverse Trade Shocks

Haibing Shu, Jagadeesh Sivadasan and Wenjian Xu
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Haibing Shu: Shanghai Jiao Tong University

No 689, Working Papers from Research Seminar in International Economics, University of Michigan

Abstract: Leveraging the unanticipated increases in US tariffs initiated in 2018, we examine how Chinese firms altered the composition and compensation of their executive team to manage adversity. Firms that faced more adverse US tariff shocks increased the proportion of executives with overseas experience, especially of those with marketing expertise and with a European background. Such executives received greater equity-based compensation, suggesting a higher return to their effort. We find suggestive evidence that these executives help maintain higher overseas revenue, and help create more and larger foreign subsidiaries. The stock market reacted more negatively to the unexpected departures of executives with foreign experience in the trade conflict period. The results suggest that executive human capital played an important role in coping with adverse trade shocks.

Keywords: Management; Experience; Trade War; Human Capital; Mobility (search for similar items in EconPapers)
JEL-codes: F12 F14 F16 G32 G34 O24 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2024-11
New Economics Papers: this item is included in nep-int
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Persistent link: https://EconPapers.repec.org/RePEc:mie:wpaper:689

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