IDEAS home Printed from https://ideas.repec.org/a/eee/finlet/v85y2025ipds1544612325014357.html

Executive equity incentives, cash holdings and corporate financialization

Author

Listed:
  • Wang, Lixin
  • Zhang, Rong

Abstract

This paper takes Chinese A-share manufacturing listed companies on the Shanghai and Shenzhen Stock Exchanges from 2013 to 2023 as a sample to empirically investigate the influence mechanism and economic consequences of equity incentives on corporate financialization. The study finds that: (1) Equity incentives for executives significantly inhibit corporate financialization; (2) Excess cash holdings play a partial mediating role. Equity incentives reduce a firm's excess cash holdings, thereby constraining unnecessary allocations to financial assets. When the actual controller concurrently serves as the chairman or general manager, the inhibitory effect of equity incentives on corporate financialization is enhanced.

Suggested Citation

  • Wang, Lixin & Zhang, Rong, 2025. "Executive equity incentives, cash holdings and corporate financialization," Finance Research Letters, Elsevier, vol. 85(PD).
    • Handle: RePEc:eee:finlet:v:85:y:2025:i:pd:s1544612325014357
    DOI: 10.1016/j.frl.2025.108180
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1544612325014357
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.frl.2025.108180?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    References listed on IDEAS

    as
    1. Zhang, Chuan & Liu, Lixia, 2023. "Corporate inventory and cash holdings in digital economy strategy: Evidence from China," Finance Research Letters, Elsevier, vol. 53(C).
    2. Fu, Xiaoxia & Wang, Shanshan & Jia, Jia, 2024. "Equity incentives and dynamic adjustments to corporate financialization: Evidence from Chinese A-share listed companies," International Review of Economics & Finance, Elsevier, vol. 92(C), pages 948-966.
    3. Zhang, Mengtao & Li, Wenwen & Luo, Yalin & Chen, Wenchuan, 2023. "Government audit supervision, financialization, and executives' excess perks: Evidence from Chinese state-owned enterprises," International Review of Financial Analysis, Elsevier, vol. 89(C).
    4. Feng, Yumei & Yu, Qiang & Nan, Xingheng & Cai, Yongbin, 2022. "Can employee stock ownership plans reduce corporate financialization? Evidence from China," Economic Analysis and Policy, Elsevier, vol. 73(C), pages 140-151.
    5. Jiang, Fuxiu & Shen, Yanyan & Cai, Xinni, 2022. "Can multiple blockholders restrain corporate financialization?," Pacific-Basin Finance Journal, Elsevier, vol. 75(C).
    6. Chang, Yuyuan & Pan, Xiaofei & Wang, Jianling & Zhou, Qing, 2021. "Depoliticization and corporate cash holdings: Evidence from the mandated resignation of directors in China," Journal of Corporate Finance, Elsevier, vol. 69(C).
    7. Chen, Yan & Sun, Ruiqi, 2023. "Corporate financialization and the long-term use of short-term debt: Evidence from China," Finance Research Letters, Elsevier, vol. 58(PD).
    8. Leng, Tiecheng & Liu, Ying & Xiao, Yi & Hou, Chunxiao, 2023. "Does firm financialization affect optimal real investment decisions? Evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 79(C).
    9. Liu, Zehao & Tang, Huoqing & Zhang, Chengsi, 2023. "Corporate governance, moral hazard, and financialization," International Review of Economics & Finance, Elsevier, vol. 88(C), pages 318-331.
    10. Feng, Yumei & Yao, Shouyu & Wang, Chunfeng & Liao, Jing & Cheng, Feiyang, 2022. "Diversification and financialization of non-financial corporations: Evidence from China," Emerging Markets Review, Elsevier, vol. 50(C).
    11. Zhang, Yongle & Zhang, Haoliang & Yang, Liming & Xu, Pengjie, 2023. "Managerial ownership and corporate financialization," Finance Research Letters, Elsevier, vol. 58(PD).
    12. Liu, Li & He, Jun, 2023. "Does financialization affect firm’ R&D investment? Evidence from China," Finance Research Letters, Elsevier, vol. 58(PA).
    13. Zheng, Di & Lei, Lei & Wang, Licheng & Li, Xuefeng, 2024. "Inhibiting or promoting: The impact of corporate social responsibility on corporate financialization," International Review of Economics & Finance, Elsevier, vol. 89(PA), pages 1404-1421.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Chen, Sichong & Liang, Shan & Chen, Meng & Zhang, Didi, 2025. "Investigation into the effects of equity incentives for executives and R&D personnel on corporate financialization," Finance Research Letters, Elsevier, vol. 77(C).
    2. Zhang, Xiaoliang & Zheng, Xiaojia, 2024. "Does carbon emission trading policy induce financialization of non-financial firms? Evidence from China," Energy Economics, Elsevier, vol. 131(C).
    3. Chen, Lirong & Long, Yuxuan & Tang, Xuemei & Wang, Jiani, 2025. "Can accounts receivable factoring restrain corporate financialization? Evidence from China," International Review of Economics & Finance, Elsevier, vol. 98(C).
    4. Wu, Kai & Lu, Yufei, 2023. "Corporate digital transformation and financialization: Evidence from Chinese listed firms," Finance Research Letters, Elsevier, vol. 57(C).
    5. Tang, Kai, 2024. "The influence of managerial ability on corporate financialization," International Review of Economics & Finance, Elsevier, vol. 93(PB), pages 1229-1245.
    6. Ma, Anmiao, 2024. "The role of management characteristics in trade frictions and corporate financialization," Finance Research Letters, Elsevier, vol. 65(C).
    7. Guo, Jingyi & Zheng, Yinglong & Du, Shilin & Tian, Grace (Li), 2025. "Institutional shareholding, corporate financialization, and regulatory penalties for listed companies," International Review of Economics & Finance, Elsevier, vol. 99(C).
    8. Wei, Xiaohui & Li, Jian & Li, Yuanhaocheng, 2025. "Institutional environment, credit risk expectations, and firms' investment strategies," Finance Research Letters, Elsevier, vol. 81(C).
    9. Lou, Chao & Xie, Shaojing, 2025. "Innovation in external supervision systems, business environment, and corporate financialization: a quasi-natural experiment based on the pilot program of prosecutorial administrative public interest litigation system," Finance Research Letters, Elsevier, vol. 86(PA).
    10. Shuxia Zhang & Xiangyang Yin & Liping Xu & Ziyu Li & Deyue Kong, 2022. "Effect of Environmental, Social, and Governance Performance on Corporate Financialization: Evidence from China," Sustainability, MDPI, vol. 14(17), pages 1-20, August.
    11. Guo, Juanjuan & Sun, Hongfeng & Wang, Shihao & Liu, Chang, 2025. "Sword suppress virtual fire: Bank regulatory sanctions help companies shift from financial to real economic activities," International Review of Financial Analysis, Elsevier, vol. 108(PB).
    12. Dong, Zixuan & Abd Aziz, Mohd Faiq & Wang, Yan, 2025. "Human capital accumulation, technological progress, and corporate financialization," International Review of Economics & Finance, Elsevier, vol. 101(C).
    13. Xie, Yan & Zhang, Juan & Zhang, Kun & Ren, Yixin, 2025. "How can wage restriction order affect a firms' financialization?," Finance Research Letters, Elsevier, vol. 72(C).
    14. Fan, Mengke & Chen, Dan & Lei, Yusen, 2025. "How government accounting supervision affects corporate financialization? Evidence from random inspections by China's ministry of finance," International Review of Economics & Finance, Elsevier, vol. 103(C).
    15. Di, Hanmei & Liu, Qingzhi & Liu, Shanshan, 2025. "Research on the impact of industrial policy on corporate financialization," Finance Research Letters, Elsevier, vol. 80(C).
    16. Shuanglian Chen & Benhuan Nie & Xiaohua Huang, 2024. "Nonlinear Impact of Corporate Financialization on Sustainable Development Ability: Evidence from Listed Companies in China," Sustainability, MDPI, vol. 16(8), pages 1-23, April.
    17. Zhang, Haonan & Zhang, Qinghua & Chen, Jian, 2025. "The impact of excessive financial investment on corporate risk," Pacific-Basin Finance Journal, Elsevier, vol. 94(C).
    18. Hu, Guoqiang & Sun, Wenxiang & Xu, Yuanzheng & Mao, Hong-an, 2025. "Executive accountability systems and the financial investments of state-owned enterprises in China," Pacific-Basin Finance Journal, Elsevier, vol. 91(C).
    19. Shangkun Liang & Weizhi Xue & Dan Yang, 2024. "Can government supervision alleviate the deviation of enterprises from the real economy to the financial sector: Evidence from China," Economics and Politics, Wiley Blackwell, vol. 36(2), pages 989-1019, July.
    20. Du, Xiaowei & Yang, Weiqiao, 2025. "Can patent pledges affect corporate financialization?," Finance Research Letters, Elsevier, vol. 73(C).

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:finlet:v:85:y:2025:i:pd:s1544612325014357. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/frl .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.