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Do insiders share pledging affect executive pay-for-performance sensitivity?

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  • Ouyang, Caiyue
  • Xiong, Jiacai
  • Fan, Lyu

Abstract

We examine the impact of insider share pledging (ISP) on executive pay-for-performance sensitivity. Using Chinese data, we find that ISP leads to a decrease in executive pay-for-performance sensitivity. The results on the additional analyses show that when firms facing high ownership change risk (non-state-owned firms, located in high marketization region, or with high stock price crash risk), the adverse impact of ISP on executive pay-for-performance sensitivity magnifies. In contrast, when a firm has good internal and external corporate governance (high institutional ownership, good internal control system, auditor with industry specific knowledge, or more analyst following), the adverse impact of ISP on executive pay-for-performance sensitivity alleviates.

Suggested Citation

  • Ouyang, Caiyue & Xiong, Jiacai & Fan, Lyu, 2019. "Do insiders share pledging affect executive pay-for-performance sensitivity?," International Review of Economics & Finance, Elsevier, vol. 63(C), pages 226-239.
    • Handle: RePEc:eee:reveco:v:63:y:2019:i:c:p:226-239
    DOI: 10.1016/j.iref.2018.10.019
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    Cited by:

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    3. Xin Hong & Yang Hu & Wanting Zhang, 2022. "Share pledge risk and government bailout fund," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 62(5), pages 4831-4848, December.
    4. Caiyue Ouyang & Xin Wang & Jiacai Xiong, 2019. "Do Controlling Shareholders Who Pledged Their Shares Affect Sustainable Development? An Investigation Based on the Perspective of Corporate Innovation," Sustainability, MDPI, vol. 11(10), pages 1-17, May.
    5. Jia, Haibo & Zhu, Ying & Chen, Xiaodan, 2024. "Stock Repurchase and Stock Price Crash Risk," Finance Research Letters, Elsevier, vol. 60(C).
    6. Zhu, Bing & Xia, Xiaoxue & Zheng, Xiaojia, 2021. "One way out of the share pledging quagmire: Evidence from mergers and acquisitions," Journal of Corporate Finance, Elsevier, vol. 71(C).
    7. Tat Dat Bui & Mohd Helmi Ali & Feng Ming Tsai & Mohammad Iranmanesh & Ming-Lang Tseng & Ming K Lim, 2020. "Challenges and Trends in Sustainable Corporate Finance: A Bibliometric Systematic Review," JRFM, MDPI, vol. 13(11), pages 1-26, October.
    8. McWalter, Thomas A. & Ritchken, Peter H., 2022. "On stock-based loans," Journal of Financial Intermediation, Elsevier, vol. 52(C).
    9. Xu, Tianli & Xu, Longbing & Zhu, Siyuan, 2023. "Common ownership and executive pay-for-performance sensitivity: Evidence from China," Research in International Business and Finance, Elsevier, vol. 65(C).
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    11. Rongli Yuan & Yadong Han & Zhanliao Chen, 2023. "Multiple Large Shareholders and Financial Reporting Quality: Evidence from China," Abacus, Accounting Foundation, University of Sydney, vol. 59(1), pages 197-229, March.
    12. Shen, Yinjie (Victor) & Wang, Wei & Zhou, Fuzhao, 2021. "Insider pledging in the U.S," Journal of Financial Stability, Elsevier, vol. 53(C).
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    More about this item

    Keywords

    Share pledging; Agency problem; Executive compensation;
    All these keywords.

    JEL classification:

    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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