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Hedging by Hiring: Executive Composition and Compensation, Responses to Adverse Trade Shocks

Author

Listed:
  • Haibing Shu

    (Shanghai Jiao Tong University)

  • Jagadeesh Sivadasan

    (University of Michigan)

  • Wenjian Xu

    (Shanghai Jiao Tong Universit)

Abstract

Leveraging the unanticipated increases in US tariffs initiated in 2018, we examine how Chinese firms altered the composition and compensation of their executive team to manage adversity. Firms that faced more adverse US tariff shocks increased the proportion of executives with overseas experience, especially of those with marketing expertise and with a European background. Such executives received greater equity-based compensation, suggesting a higher return to their effort. We find suggestive evidence that these executives help maintain higher overseas revenue, and help create more and larger foreign subsidiaries. The stock market reacted more negatively to the unexpected departures of executives with foreign experience in the trade conflict period. The results suggest that executive human capital played an important role in coping with adverse trade shocks.

Suggested Citation

  • Haibing Shu & Jagadeesh Sivadasan & Wenjian Xu, 2024. "Hedging by Hiring: Executive Composition and Compensation, Responses to Adverse Trade Shocks," Working Papers 689, Research Seminar in International Economics, University of Michigan.
    • Handle: RePEc:mie:wpaper:689
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    More about this item

    Keywords

    Management; Experience; Trade War; Human Capital; Mobility;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • O24 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions

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