IDEAS home Printed from https://ideas.repec.org/a/eee/jocaae/v21y2025i3s1815566925000499.html

Executive compensation stickiness, social trust and enterprise innovation

Author

Listed:
  • Zu, Yafei
  • Ma, Chenmin
  • Sun, Qian

Abstract

Taking Chinese A-share listed enterprises from 2009 to 2019 as samples, this study finds that executive compensation stickiness exhibits a significantly positive impact on enterprise innovation, with social trust playing a positive moderating role. This finding remains valid in a series of robustness tests. Channel analyses show that risk-taking plays a mediating role in the relationship between executive compensation stickiness and enterprise innovation. Cross-sectional analyses show that such positive effect is more significant for state-owned enterprises and enterprises with risk-averse executives, better supervisions, and in economically developed regions. Additional analyses indicate that, different types of executive compensation stickiness have great differences in incentive effect, and executive compensation stickiness can improve enterprise performance through enterprise innovation. This paper not only enriches the research on the consequences of executive compensation stickiness, but also expands insights into the interaction between formal and informal controls.

Suggested Citation

  • Zu, Yafei & Ma, Chenmin & Sun, Qian, 2025. "Executive compensation stickiness, social trust and enterprise innovation," Journal of Contemporary Accounting and Economics, Elsevier, vol. 21(3).
    • Handle: RePEc:eee:jocaae:v:21:y:2025:i:3:s1815566925000499
    DOI: 10.1016/j.jcae.2025.100502
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1815566925000499
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jcae.2025.100502?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. Wang Dong & Hongling Han & Yun Ke & Kam C. Chan, 2018. "Social Trust and Corporate Misconduct: Evidence from China," Journal of Business Ethics, Springer, vol. 151(2), pages 539-562, August.
    2. Brockman, Paul & Khurana, Inder K. & Zhong, Rong (Irene), 2018. "Societal trust and open innovation," Research Policy, Elsevier, vol. 47(10), pages 2048-2065.
    3. repec:oup:rfinst:v:21:y:2017:i:5:p:1805-1846. is not listed on IDEAS
    4. Barth, Mary E. & Gee, Kurt H., 2024. "Accounting and innovation: Paths forward for research," Journal of Accounting and Economics, Elsevier, vol. 78(2).
    5. Hasan, Iftekhar & He, Qing & Lu, Haitian, 2022. "Social Capital, Trusting, and Trustworthiness: Evidence from Peer-to-Peer Lending," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 57(4), pages 1409-1453, June.
    6. Sun, Qian & Cheng, Xiaoke & Gao, Shenghao & Chen, Tao & Liu, Jia, 2023. "Sunshine-induced mood and SEO pricing: Evidence from detailed investor bids in SEO auctions," Journal of Corporate Finance, Elsevier, vol. 80(C).
    7. Wu, Wenfeng & Firth, Michael & Rui, Oliver M., 2014. "Trust and the provision of trade credit," Journal of Banking & Finance, Elsevier, vol. 39(C), pages 146-159.
    8. Chami, Ralph & Fullenkamp, Connel, 2002. "Trust and efficiency," Journal of Banking & Finance, Elsevier, vol. 26(9), pages 1785-1809, September.
    9. Boubakri, Narjess & Cosset, Jean-Claude & Saffar, Walid, 2013. "The role of state and foreign owners in corporate risk-taking: Evidence from privatization," Journal of Financial Economics, Elsevier, vol. 108(3), pages 641-658.
    10. Gande, Amar & Kalpathy, Swaminathan, 2017. "CEO compensation and risk-taking at financial firms: Evidence from U.S. federal loan assistance," Journal of Corporate Finance, Elsevier, vol. 47(C), pages 131-150.
    11. Hemmer, Thomas & Kim, Oliver & Verrecchia, Robert E., 1999. "Introducing convexity into optimal compensation contracts," Journal of Accounting and Economics, Elsevier, vol. 28(3), pages 307-327, December.
    12. Sunden, Annika E & Surette, Brian J, 1998. "Gender Differences in the Allocation of Assets in Retirement Savings Plans," American Economic Review, American Economic Association, vol. 88(2), pages 207-211, May.
    13. Li, Xiaorong & Wang, Steven Shuye & Wang, Xue, 2019. "Trust and IPO underpricing," Journal of Corporate Finance, Elsevier, vol. 56(C), pages 224-248.
    14. James Cordeiro & Lerong He & Martin Conyon & Tara Shaw, 2016. "Chinese executive compensation: the role of asymmetric performance benchmarks," The European Journal of Finance, Taylor & Francis Journals, vol. 22(4-6), pages 484-505, April.
    15. Jackson, Scott B. & Lopez, Thomas J. & Reitenga, Austin L., 2008. "Accounting fundamentals and CEO bonus compensation," Journal of Accounting and Public Policy, Elsevier, vol. 27(5), pages 374-393.
    16. Zhang, Rongwu & Lin, Yanzhen & Zhang, Wenjia & Du, Jianjun, 2024. "Mixed ownership reform of state-owned enterprises and executive compensation stickiness: Evidence from China," International Review of Economics & Finance, Elsevier, vol. 95(C).
    17. Mara Faccio & Maria-Teresa Marchica & Roberto Mura, 2011. "Large Shareholder Diversification and Corporate Risk-Taking," The Review of Financial Studies, Society for Financial Studies, vol. 24(11), pages 3601-3641.
    18. Kristian Waerness & Elsa Solstad & Bernt Arne Bertheussen, 2023. "Trust-based management control in inter-organizational relationships," Journal of Management Control: Zeitschrift für Planung und Unternehmenssteuerung, Springer, vol. 34(3), pages 317-346, September.
    19. Yeshen Liu & Zhengtang Zhang & Zhe Song, 2024. "Does Executives’ Compensation Stickiness Encourage Environmental Investments? An Environmental Attention-Based Perspective," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 60(11), pages 2477-2496, September.
    20. Glaeser, Stephen & Lang, Mark, 2024. "Measuring innovation and navigating its unique information issues: A review of the accounting literature on innovation," Journal of Accounting and Economics, Elsevier, vol. 78(2).
    21. Zhao, Qicheng & Hu, Changyu & Ma, Ruiyun & Yin, Yugang & Liu, Yahui, 2024. "Foreign shareholders and executive compensation stickiness: Evidence from China," Finance Research Letters, Elsevier, vol. 59(C).
    22. Markus Kreutzer & Laura B. Cardinal & Jorge Walter & Christoph Lechner, 2016. "Formal and Informal Control as Complement or Substitute? The Role of the Task Environment," Strategy Science, INFORMS, vol. 1(4), pages 235-255, December.
    23. Ingolf Dittmann & Ko-Chia Yu & Dan Zhang, 2017. "How Important Are Risk-Taking Incentives in Executive Compensation?," Review of Finance, European Finance Association, vol. 21(5), pages 1805-1846.
    24. Gormley, Todd A. & Matsa, David A. & Milbourn, Todd, 2013. "CEO compensation and corporate risk: Evidence from a natural experiment," Journal of Accounting and Economics, Elsevier, vol. 56(2), pages 79-101.
    25. Andrew C. Inkpen & Steven C. Currall, 2004. "The Coevolution of Trust, Control, and Learning in Joint Ventures," Organization Science, INFORMS, vol. 15(5), pages 586-599, October.
    26. Chandra S Mishra & Daniel L McConaughy & David H Gobeli, 2000. "Effectiveness of CEO pay‐for‐performance," Review of Financial Economics, John Wiley & Sons, vol. 9(1), pages 1-13, March.
    27. Mishra, Chandra S. & McConaughy, Daniel L. & Gobeli, David H., 2000. "Effectiveness of CEO pay-for-performance," Review of Financial Economics, Elsevier, vol. 9(1), pages 1-13.
    28. Elizabeth N. K. Lim & Brian T. McCann, 2014. "Performance Feedback and Firm Risk Taking: The Moderating Effects of CEO and Outside Director Stock Options," Organization Science, INFORMS, vol. 25(1), pages 262-282, February.
    29. Kiridaran Kanagaretnam & Jimmy Lee & Chee Yeow Lim & Gerald Lobo, 2018. "Societal trust and corporate tax avoidance," Review of Accounting Studies, Springer, vol. 23(4), pages 1588-1628, December.
    30. Deqiu Chen & Li Li & Xuejiao Liu & Gerald J. Lobo, 2018. "Social Trust and Auditor Reporting Conservatism," Journal of Business Ethics, Springer, vol. 153(4), pages 1083-1108, December.
    31. Toshiaki Wakabayashi, 2022. "Fixed salary or incentive contract? The effect of stickiness of compensation contracts," Asia-Pacific Journal of Accounting & Economics, Taylor & Francis Journals, vol. 29(1), pages 179-190, January.
    32. Wang, Ming-Chao & Chen, Pei-Chen & Fang, Shih-Chieh, 2018. "A critical view of knowledge networks and innovation performance: The mediation role of firms' knowledge integration capability," Journal of Business Research, Elsevier, vol. 88(C), pages 222-233.
    33. James G. March & Zur Shapira, 1987. "Managerial Perspectives on Risk and Risk Taking," Management Science, INFORMS, vol. 33(11), pages 1404-1418, November.
    34. Adhikari, Binay K. & Agrawal, Anup & Malm, James, 2019. "Do women managers keep firms out of trouble? Evidence from corporate litigation and policies," Journal of Accounting and Economics, Elsevier, vol. 67(1), pages 202-225.
    35. Vosselman, Ed & Meer-Kooistra, Jeltje van der, 2009. "Accounting for control and trust building in interfirm transactional relationships," Accounting, Organizations and Society, Elsevier, vol. 34(2), pages 267-283, February.
    36. Mao, Connie X. & Zhang, Chi, 2018. "Managerial Risk-Taking Incentive and Firm Innovation: Evidence from FAS 123R," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 53(2), pages 867-898, April.
    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. Gu, Leilei & Liu, Zhongyang & Ma, Sichao & Wang, Hongyu, 2022. "Social trust and corporate financial asset holdings: Evidence from China," International Review of Financial Analysis, Elsevier, vol. 82(C).
    2. Lyu, Xiaoliang & Ma, Jiameng & Zhang, Xiaochen, 2023. "Social trust and corporate innovation: An informal institution perspective," The North American Journal of Economics and Finance, Elsevier, vol. 64(C).
    3. Ding, Xiaoya (Sara) & Guo, Mengmeng & Kuai, Yicheng & Niu, Geng, 2023. "Social trust and firm innovation: Evidence from China," International Review of Economics & Finance, Elsevier, vol. 84(C), pages 474-493.
    4. Qin, Wei & Liang, Quanxi & Jiao, Yan & Lu, Meiting & Shan, Yaowen, 2022. "Social trust and dividend payouts: Evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 72(C).
    5. Tan, Weiqiang & Xie, Weimin & Zhang, Hengxin, 2026. "Social trust and management appointment in family firms," Research in International Business and Finance, Elsevier, vol. 81(C).
    6. Yu, Lin & Ye, Jiahui & Yang, Lin, 2025. "From endowed trust to earned trust: Firms located in trusted regions," International Review of Financial Analysis, Elsevier, vol. 104(PA).
    7. Xia, Changyuan & Chan, Kam C. & Cao, Chunfang & Tan, Youchao, 2021. "Generalized trust, personalized trust, and dynamics of capital structure: Evidence from China," China Economic Review, Elsevier, vol. 68(C).
    8. Yaru Yang & Desheng Liu & Luxiu Zhang & Yingkai Yin, 2021. "Social Trust and Green Technology Innovation: Evidence from Listed Firms in China," Sustainability, MDPI, vol. 13(9), pages 1-18, April.
    9. Dong, Wang & Ke, Yun & Li, Shuo & Chen, Xiangyu & Wan, Peng, 2021. "Does social trust restrain excess perk consumption? Evidence from China," International Review of Economics & Finance, Elsevier, vol. 76(C), pages 1078-1092.
    10. Stavros Kourtzidis & Nickolaos G. Tzeremes, 2019. "Investigating the determinants of firm performance," European Journal of Management and Business Economics, Emerald Group Publishing Limited, vol. 29(1), pages 3-22, June.
    11. Xie, Heng & Cui, Xieyuan & Cao, Nannan & Guo, Zhouqi & Zhang, Qianchuan, 2024. "Social trust and the cost of equity," Finance Research Letters, Elsevier, vol. 63(C).
    12. Chen, Xuanyi & Tong, Jiarui, 2025. "Social trust and workplace safety," Finance Research Letters, Elsevier, vol. 85(PA).
    13. Guo, Junru & He, Jia & Liu, Sibo & Wang, Yonglin, 2025. "CEO relative age at school entry and corporate risk-taking," Journal of Banking & Finance, Elsevier, vol. 176(C).
    14. Leilei Gu & Jinyu Liu & Yuchao Peng, 2022. "Locality Stereotype, CEO Trustworthiness and Stock Price Crash Risk: Evidence from China," Journal of Business Ethics, Springer, vol. 175(4), pages 773-797, February.
    15. Sungchang Kang & Jeongseok Bang & Doojin Ryu, 2024. "Female CEOs’ risk management and earnings performance during the financial crisis," Asian Business & Management, Palgrave Macmillan, vol. 23(1), pages 110-138, February.
    16. Guo, Jintong & Ding, Rui & Zhang, Ziyi & Zhang, Min, 2025. "Top executives' emotional stability and firm risk-taking: A machine learning-based study," Pacific-Basin Finance Journal, Elsevier, vol. 90(C).
    17. Qi Shuang & Jintao Lu & Sen Wang & Denise Callari & Nicola Cucari, 2024. "Exploring the power of informal institutions: How does social trust affect corporate's greenwashing strategy," Business Strategy and the Environment, Wiley Blackwell, vol. 33(8), pages 9098-9115, December.
    18. Tian, Yonggang & Ang, James S. & Fu, Panpan & Ma, Chaoqun & Wang, Xiuhua, 2024. "Does social trust mitigate insiders' opportunistic behaviors? Evidence from insider trading," Global Finance Journal, Elsevier, vol. 59(C).
    19. Jha, Anand & Oyotode-Adebile, Renee & Raja, Zubair Ali, 2024. "Societal trust and corporate bankruptcy," Journal of Financial Stability, Elsevier, vol. 73(C).
    20. Chen, Linrong & Zeng, Huixiang, 2024. "Can social trust promote the professional division of labor in firms? Evidence from China," International Review of Economics & Finance, Elsevier, vol. 89(PB), pages 363-377.

    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:jocaae:v:21:y:2025:i:3:s1815566925000499. 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: https://www.journals.elsevier.com/journal-of-contemporary-accounting-and-economics .

    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.