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Blockholder exit threats and excess executive perks

Author

Listed:
  • Chen, Kejing
  • Jiang, Lin
  • Kang, Yanling
  • Yang, Mo
  • Zhen, Jiahua

Abstract

There is a growing interest in the influence of blockholder exit threats on corporate governance. When perceive managerial underperformance, blockholders have strong incentives to reduce their shareholding, which in turn requires managers to align their actions with the interests of shareholders. In this paper, we further develop the theory of blockholder exit threats by scrutinizing the influence of blockholder exit threats on excess executive perks. Empirical results suggest that blockholder exit threats have a significant reducing effect on excess executive perks, which is further confirmed via robustness checks. It is also found that the reducing effect is enhanced when managers’ wealth is closely related to stock prices, blockholders are long-term strategic blockholders, or short selling is allowed, under the condition of a deteriorating information environment or corporate governance, or before the Blockholders Reduction Restrictions.

Suggested Citation

  • Chen, Kejing & Jiang, Lin & Kang, Yanling & Yang, Mo & Zhen, Jiahua, 2024. "Blockholder exit threats and excess executive perks," International Review of Economics & Finance, Elsevier, vol. 93(PA), pages 80-97.
    • Handle: RePEc:eee:reveco:v:93:y:2024:i:pa:p:80-97
    DOI: 10.1016/j.iref.2024.03.021
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    More about this item

    Keywords

    Blockholder exit threat; Excess executive perk; Wealth-performance sensitivity; Corporate governance;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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