Executive compensation stickiness, social trust and enterprise innovation

Abstract

Taking Chinese A-share listed enterprises from 2009 to 2019 as samples, this study finds that executive compensation stickiness exhibits a significantly positive impact on enterprise innovation, with social trust playing a positive moderating role. This finding remains valid in a series of robustness tests. Channel analyses show that risk-taking plays a mediating role in the relationship between executive compensation stickiness and enterprise innovation. Cross-sectional analyses show that such positive effect is more significant for state-owned enterprises and enterprises with risk-averse executives, better supervisions, and in economically developed regions. Additional analyses indicate that, different types of executive compensation stickiness have great differences in incentive effect, and executive compensation stickiness can improve enterprise performance through enterprise innovation. This paper not only enriches the research on the consequences of executive compensation stickiness, but also expands insights into the interaction between formal and informal controls.