Minority shareholders protection and executive compensation contract effectiveness: Evidence from the establishment of the China Securities Investor Service Center

This study examines the governance effect of minority shareholders from the perspective of executive compensation stickiness. Taking the China Securities Investor Service Center's (ISC) execution of shareholder rights as a quasi-natural experiment, with a sample from China's A-share listed companies from 2013 to 2022, our findings reveal that ISC shareholder rights enforcement significantly reduces executive compensation stickiness. This is achieved through increased external attention, which mitigates information asymmetry, and by curbing tunneling behavior from controlling shareholders. Further analysis highlights that the impact of ISC enforcement is more pronounced for firms with lower external auditor monitoring, less developed legal environment, lower institutional ownership, and higher managerial power. These findings underscore the ISC's role in enhancing corporate governance and protecting minority shareholder benefits, offering policy implications for strengthening investor rights and regulatory oversight mechanisms.