Institutional Investors Distraction And Executive Compensation Stickiness

On April 11,2022,the CSRC,the SASAC and the All-China Federation of Industry and Commerce issued the Notice on Further Supporting the Healthy Development of Listed Companies to encourage and support long-term institutional investors to enter the market,improve the structure of market investors and improve the quality of listed companies.Thus,with the continuous improvement of Chinese capital market,the importance of institutional governance in enterprise development and economic operation has become increasingly prominent.However,the institutional investors attention is limited,and they can only use scarce cognitive resources to allocate assets to maximize returns,which will lead to a series of economic consequences related to weak attention of stocks.As a hot topic in corporate governance,executive compensation is closely related to stakeholder groups.However,the current research focuses on the influencing factors of internal and external corporate governance mechanisms,and has not carried out research on the exogenous behavior of institutional investors distraction.Based on the impact of extreme industry returns on the attention of institutional investors,this paper takes Chinese A-share listed companies from 2011 to 2020 as samples and empirically tests the relationship between institutional investors distraction and executive compensation stickiness.Research finds that there is an asymmetry in the sensitivity of executive compensation to performance in Chinese listed companies,which means there is a stickiness characteristic of executive compensation;institutional investors distraction exacerbates the issue of executive compensation stickiness,and this effect is more significant in the pressure resistant group of institutional investors.The mechanism test finds that based on the principal-agent theory,information asymmetry theory,and behavioral finance theory,external corporate governance,stock price information content,and management concerns partially mediate the relationship between institutional investors distraction and executive compensation stickiness.The moderating effect finds that the level of internal governance and overconfidence of managers can weaken the impact of institutional investors distraction on executive compensation stickiness.In addition,the economic impact of the distraction behavior of non-state-owned enterprises and institutional investors in western regions is more significant.This paper combines behavioral finance theory with principal-agent theory and information asymmetry theory,introduces the variable of institutional investors attention constraint,and then studies its impact on the executive compensation stickiness of Chinese A-share listed companies,which enriches the theoretical research on corporate governance.At the same time,promote institutional investors to realize their limited attention,effectively balance income risk,optimize resource allocation,help listed companies formulate relevant rules and regulations to attract institutional investors to join and optimize the executive compensation structure,improve internal governance,and also provide some regulatory thinking for the government on the impact of institutional investors attention on the capital market.