RESEARCH ARTICLE
Non-controlling shareholder activism and executive pay-for-performance sensitivity: Evidence from the over-appointment of directors in the Chinese market
Shengnan Li,
Jiaqi Wang,
Xinya Zheng,
Chiyun Zhu,
Corresponding Author
Shengnan Li
College of Management and Economics, Tianjin University, Tianjin, China
Correspondence
Shengnan Li, College of Management and Economics, Tianjin University, Tianjin, China.
Email: [email protected]
Search for more papers by this authorJiaqi Wang
College of Management and Economics, Tianjin University, Tianjin, China
Search for more papers by this authorXinya Zheng
College of Management and Economics, Tianjin University, Tianjin, China
Search for more papers by this authorChiyun Zhu
College of Management and Economics, Tianjin University, Tianjin, China
Search for more papers by this authorShengnan Li,
Jiaqi Wang,
Xinya Zheng,
Chiyun Zhu,
Corresponding Author
Shengnan Li
College of Management and Economics, Tianjin University, Tianjin, China
Correspondence
Shengnan Li, College of Management and Economics, Tianjin University, Tianjin, China.
Email: [email protected]
Search for more papers by this authorJiaqi Wang
College of Management and Economics, Tianjin University, Tianjin, China
Search for more papers by this authorXinya Zheng
College of Management and Economics, Tianjin University, Tianjin, China
Search for more papers by this authorChiyun Zhu
College of Management and Economics, Tianjin University, Tianjin, China
Search for more papers by this authorAbstract
We examine the impact of non-controlling shareholder activism on the effectiveness of executive compensation contract, particularly focusing on the over-appointment of directors in A-share firms listed on the Shanghai and Shenzhen Stock Exchanges from 2008 to 2021. We discover that such over-appointments by non-controlling shareholders significantly promote executive pay-for-performance sensitivity of these enterprises. This effect becomes even more pronounced in enterprises that display a weaker government intervention and media attention. Further mechanism analysis indicates that over-appointments improve the effectiveness of compensation contract by improving the quality of accounting information and restraining executives' opportunistic behaviour. Our further research finds that over-appointments by non-controlling shareholders can effectively reduce executive compensation stickiness, while significantly increasing the absolute salary level of executives. There is no evidence to suggest that independent directors increase executive pay-for-performance sensitivity.
Open Research
DATA AVAILABILITY STATEMENT
The data that support the findings of this study are available from China Stock Market & Accounting Research database. Restrictions apply to the availability of these data, which were used under license for this study. Data are available from the authors with the permission of China Stock Market & Accounting Research database.
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