Institutional investors' information access and executive pay gaps: Evidence from corporate site visits in China

Abstract

The study examines the impact of institutional investors' corporate site visits on the executive pay gap. Using data covering all A-share listed companies in China, our findings reveal a substantial reduction in the executive pay gap attributable to corporate site visits. This effect is more pronounced among non-state-owned firms and companies in a declining life cycle. We propose that corporate site visits enhance transparency in company information, thereby mitigating the executive pay gap by making it harder for powerful executives to leverage their authority for pay increases. In addition, we find that institutional investor ownership and corporate site visits serve as substitutes in mitigating the executive pay gap, and a reduced pay gap leads to enhanced future corporate performance. Furthermore, our study underscores corporate site visits as an effective channel for institutional investors to access firm-specific internal information and conduct corporate governance.