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The impact of executive compensation stickiness on enterprises’ green innovation efficiency—— A threshold effect based on audit quality

Author

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  • Liu, Xiangwei
  • Li, Yubinyang
  • Lau, Yengwai
  • Yaacob, Zulnaidi

Abstract

In the context of China's "dual carbon" strategy, enhancing enterprises’ green innovation efficiency has become a critical pathway to achieving high-quality development. Drawing on panel data from Chinese A-share listed companies spanning 2010–2022, this study investigates the threshold effect of audit quality (AQ) on the relationship between executive compensation stickiness (ECS) and enterprises’ green innovation efficiency. A nonlinear panel regression model is employed to conduct the empirical analysis. The findings reveal that ECS significantly hinders both green R&D efficiency (Grd) and green achievement conversion efficiency (Gcon), with the negative effect being more pronounced during the achievement conversion stage. Further threshold analysis indicates that when AQ falls below the threshold value of –0.0135, moderate compensation stickiness can mitigate short-term managerial behavior and enhance R&D efficiency. However, once AQ surpasses this threshold, excessive stickiness undermines performance-based incentives, hampers innovation input efficiency, and exhibits an inverted U-shaped relationship between ECS and Grd, highlighting that the non-linear effect is only significant under high audit quality. In contrast, AQ does not exhibit a significant threshold effect during the achievement conversion phase. This study contributes to the literature on green innovation and enterprise governance by providing empirical evidence on the interplay between executive incentive structures and external oversight mechanisms.

Suggested Citation

  • Liu, Xiangwei & Li, Yubinyang & Lau, Yengwai & Yaacob, Zulnaidi, 2025. "The impact of executive compensation stickiness on enterprises’ green innovation efficiency—— A threshold effect based on audit quality," Finance Research Letters, Elsevier, vol. 86(PE).
    • Handle: RePEc:eee:finlet:v:86:y:2025:i:pe:s1544612325019452
    DOI: 10.1016/j.frl.2025.108691
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    References listed on IDEAS

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