Executive Compensation Stickiness,Environmental Uncertainty And Corporate Risk-taking

As an important means to solve the problem of agency between shareholders and executives,the compensation mechanism plays a huge role in motivating executives to work hard to improve corporate performance.However,in recent years,the unreasonable phenomenon of executive compensation of listed companies in China has aroused the high attention of the society.Frequently exposed high-level executive salary is not the result of effective implementation of salary incentives,what restricts the effectiveness of executive compensation incentives and how establishing an effective salary mechanism has become an important issue that needs to be solved urgently in the research of executive compensation.Although the performance-based compensation system has been gradually established in China,the correlation between executive compensation and corporate performance has also increased year by year,but this does not mean that listed companies' executive compensation and corporate performance have changed in the same range.Scholars have found that the marginal increase in executive compensation in the case of increased performance is significantly greater than the marginal reduction in performance decline,and the asymmetry in the change in sensitivity of this performance is defined as compensation stickiness.Although the existence of executive compensation stickiness has been verified,scholars have not yet reached a unified conclusion on the nature of compensation stickiness and what role it plays in corporate governance.Risk-taking as the investment and financing decision-making behavior of enterprises reflects the willingness of enterprises to take risks in pursuit of high-yield investment opportunities.Due to the existence of the agency problem,the corporate risk-taking reflects the investment decision-making preference of the executives to a certain extent.A large number of scholars have provided extensive evidence for the influencing factors of risk-taking from the perspective of the external institutional environment,compensation incentives and personal characteristics of executives.However,there is little literature that directly studies the stickiness of executive compensation and corporate risk-taking.Therefore,this article will expand the research horizon and explore whether the stickiness of executive compensation is the product of agency problems,which may cause executive investment decisions to deviate from shareholders' expectations,or as an incentive mechanism for tolerating failure,thereby alleviating the management's excessively conservative investment behavior.In order to explore the nature of executive compensation stickiness,this paper takes the listed companies of Shanghai and Shenzhen stocks in 2007-2013 as a research sample,and establishes pluralism from principal-agent theory,information asymmetry theory,optimal contract theory and private cost and private income theory.The regression model examines the relationship between executive compensation stickiness and corporate risktaking.On this basis,it is discussed whether there are differences in the impact of executive compensation stickiness on corporate risk-taking under different levels of environmental uncertainty.In addition,in order to play the role of executive compensation contract,corporate governance mechanisms are indispensable.Therefore,in further research.From the perspective of internal incentives,internal supervision and external governance,this paper studies the relationship between executive compensation stickiness and corporate risk-taking under the influence of level of executive shareholding,the independence of the board of directors and the different institutional investors.The empirical results of this paper show that:(1)The higher the executive compensation stickiness,the lower the level of corporate risk-taking.The possible reason is that the stickiness of executive compensation as a product of the agency problem weakens the incentive and restraint effect of the compensation mechanism,so the lower the motivation for executives to pursue monetary compensation,the more they tend to pursue good reputation and good work future.Therefore,in order to avoid the bad impact of high-risk project investment failure on personal reputation,career prospects and job image,executives will be more cautious in investment decisions.(2)The higher the environmental uncertainty,the more significant the negative effect of executive compensation stickiness on the level of corporate risk-taking.(3)Further research found that equity incentives strengthened the negative relationship between executive compensation stickiness and corporate risk-taking.Board independence and stable institutional investors can alleviate the negative relationship between executive compensation stickiness and corporate risk-taking.The research contribution and significance of the article are as follows: from the perspective of the economic consequences of executive compensation stickiness,this paper explores the impact of executive compensation stickiness on corporate risk-taking,expands the perspective and depth of compensation stickiness research,and helps enterprises understand and pay attention to compensation stickiness.The phenomenon has a certain guiding role for the design of executive compensation contract.On this basis,it explores the relationship between executive compensation stickiness and corporate risk-taking under the influence of executive shareholding levels,board independence and institutional investors,and provide some reference and reference value for enterprises to improve governance mechanism,reduce agency costs and play the role of compensation mechanism.