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Executive Compensation and Corporate Financial Leverage: Empirical Evidence from Listed Companies in China

In: Proceedings of the 2025 5th International Conference on Informatization Economic Development and Management (IEDM 2025)

Author

Listed:
  • Xingyi Qiu

    (HOHAI University, Business School)

Abstract

As capital markets evolve, financial leverage has become a critical factor in managing risk and ensuring long-term growth for companies. Executive compensation, a vital aspect of corporate governance, significantly influences financial decisions, risk-taking, and capital structure adjustments. This study empirically examines how executive compensation affects corporate financial leverage under China’s “Deleveraging Policy”, using data from non-financial state-owned and private A-share listed companies between 2015 and 2023. The analysis reveals a strong negative relationship, showing that higher executive compensation reduces financial leverage by encouraging practices like repaying debt and increasing internal and equity financing. The findings are robust, with additional tests confirming the results. Heterogeneity analysis indicates that the impact is more pronounced in state-owned and larger companies. These findings highlight the importance of aligning executive pay with long-term financial stability and sustainability.

Suggested Citation

  • Xingyi Qiu, 2025. "Executive Compensation and Corporate Financial Leverage: Empirical Evidence from Listed Companies in China," Advances in Economics, Business and Management Research, in: Meilin Zhang & Au Yong Hui Nee & Khurram Shehzad & Sameer Kumar & Ehsan Javanmardi (ed.), Proceedings of the 2025 5th International Conference on Informatization Economic Development and Management (IEDM 2025), pages 137-150, Springer.
    • Handle: RePEc:spr:advbcp:978-94-6463-724-3_14
    DOI: 10.2991/978-94-6463-724-3_14
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