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How does executive pay stickiness affect corporate risk-taking under an innovation strategy orientation?

Author

Listed:
  • Song, Xiaoyue
  • Yuan, Yuetong
  • Hu, Keer
  • Liu, Jialin

Abstract

Based on 2010–2021 Chinese a-share listed company data from the CSMAR database, this study empirically investigates the impact of executive pay stickiness on corporate risk-taking levels within an innovation strategy framework. Utilizing a two-way fixed effects model with comprehensive control variables, we find that pay stickiness significantly promotes corporate risk-taking, a conclusion robust to endogenous treatment and alternative specifications. Results from the heterogeneity tests show that this substantially stronger in non-state-owned enterprises. Mechanism tests indicate innovation investment growth serves as a partial mediator, while market competition intensity positively moderates the relationship. Our findings highlight the synergistic governance effect between internal incentive mechanisms and external market discipline, providing important implications for optimizing executive compensation design and innovation policy formulation.

Suggested Citation

  • Song, Xiaoyue & Yuan, Yuetong & Hu, Keer & Liu, Jialin, 2026. "How does executive pay stickiness affect corporate risk-taking under an innovation strategy orientation?," Finance Research Letters, Elsevier, vol. 89(C).
    • Handle: RePEc:eee:finlet:v:89:y:2026:i:c:s154461232502553x
    DOI: 10.1016/j.frl.2025.109304
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    Keywords

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    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • M12 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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