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Corporate unity culture and executives' pay-performance sensitivity: Evidence from China

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  • Yuan, Rongli
  • Jiang, Na

Abstract

This study investigates whether corporate unity culture affects executives' pay-performance sensitivity based on Chinese A-share listed firms over the period 2005–2020. Using a text-analysis method, we identify firms characterized by a unity culture. Our results indicate that firms with a unity culture exhibit higher executives' pay-performance sensitivity. This association is robust to a series of endogeneity tests, including controlling for some possible omitted variables, adjusting fixed effects, entropy balancing method, Oster test, instrumental variable approach, and difference-in-differences analysis. Cross-sectional analyses show that the effect of corporate unity culture on executives' pay-performance sensitivity is stronger for firms operating in less competitive industries and those without multiple large shareholders. Finally, we identify that mitigating agency costs appears to be the possible underlying mechanism through which corporate unity culture improves executives' pay-performance sensitivity.

Suggested Citation

  • Yuan, Rongli & Jiang, Na, 2025. "Corporate unity culture and executives' pay-performance sensitivity: Evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 93(C).
    • Handle: RePEc:eee:pacfin:v:93:y:2025:i:c:s0927538x25002392
    DOI: 10.1016/j.pacfin.2025.102902
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    JEL classification:

    • M12 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility

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