Download pdf
Executive Internal Compensation, Executive Confidence and Corporate Risk Taking
- 1 Liaoning University
* Author to whom correspondence should be addressed.
Abstract
Researchers in the field of corporate governance has been committed to exploring the causes and effects of internal compensation dispersion. From the perspective of psychology, this paper discusses the effect of the executive internal compensation gap on risk-taking within the enterprise, from the perspective of CEO overconfidence. According to figures from non-financial corporations listed on Shanghai and Shenzhen A-shares from 2010 to 2021, the results of the research are as follows: (1) The internal executive pay gap has a positive impact on the company's level of risk-taking; (2) The large pay gap between CEO and non-CEO executives will cause CEO overconfidence; (3) CEO overconfidence is a path of action that the internal pay gap of senior executives affects enterprise risk-taking; (4) The internal pay gap of senior executives has a positive impact on the level of enterprise risk-taking both in state-owned enterprises and non-state-owned enterprises. The conclusion of this study has certain theoretical and practical significance. From the theoretical level, the introduction of CEO's psychological factors into the mechanism of the effect of the internal executive pay gap on enterprise risk-taking will help to understand the impact of compensation dispersion and enrich the research in this field. From the practical level, the results of this study have bright implications for policymakers and business practitioners.
Keywords
executive internal compensation, CEO overconfidence, enterprise risk-taking
[1]. Connelly L., Haynes T., Tihanyi L. et al.: Minding the gap antecedents and consequences of top management-to-worker pay dispersion. Journal of management 42(4), 862-885 (2016).
[2]. Ran W., Yu L.: Will the internal compensation gap of senior executives affect the risk taking of enterprises. Finance and accounting monthly (06), 55-64 (2022).
[3]. John K., Litov L., Yeung B.: Corporate governance and corporate risk taking. The journal of finance 63(4), 1679-1728 (2008).
[4]. Jianbo N., Shengnan L., Yulong Y. et al.: Executive pay gap, governance model and enterprise innovation. Management science 32(02), 77-93 (2019).
[5]. Dongmin K., Tianshui L., Yunhao D.: CEO overconfidence and enterprise innovation. CUHK Management research 10(01), 80-101 (2015).
[6]. Minggui Y., Wengui L., Hongbo P.: Overconfidence of managers and enterprise risk taking. Financial research (01), 149-163 (2013).
[7]. Dongmin K., Mingli X., Gaowen K.: Internal pay gap and innovation. Economic research 52(10), 144-157 (2017).
[8]. Junqing L., Zuhui H., Yongxiang S.: Remuneration gap, corporate performance and governance structure within the executive team. Economic research (04), 31-40 (2003).
[9]. Ridge W., Aime F., White A.: When much ,ore of a difference makes a difference: Social comparison and tournaments in the CEO's top team. Strategic management journal (4), 618-636 (2015).
[10]. Williams L., Mcdaniel A., Nguyen T.: A meta-analysis of the antecedents and consequences of pay level satisfaction. Journal of applied psychology 91(2), 392-413 (2006).
[11]. Hambrick C., Mason A.: Upper echelons: the organization as a reflection of its top managers. Academy of management review 9(2), 193-206 (1984).
[12]. Ming Z., Hailin L., Ping Z.: Overconfidence of managers: research review and prospect. Foreign economics and management 41(2), 17-29 (2019).
[13]. Shanhui W., Zongjun W., Yuan T.: Managerial overconfidence, free cash flow and diversification of listed companies. Journal of industrial engineering and engineering management 29(2), 103-111 (2015).
[14]. Roll R.: The hubris hypothesis of corporate takeovers. The journal of business 59(2), 197-216 (1986).
[15]. Coles J., Daniel N., Naveen L.: Managerial incentives and risk-taking. Journal of financial economics (79), 431-468 (2006).
[16]. Hayward A., Hambrick C.: Explaining the premiums paid for large acquisitions: evidence of CEO hubris. Administrative Science Quarterly 42(1), 103-127 (1997).
Cite this article
Dong,J. (2023). Executive Internal Compensation, Executive Confidence and Corporate Risk Taking. Advances in Economics, Management and Political Sciences,19,333-341.
Data availability
The datasets used and/or analyzed during the current study will be available from the authors upon reasonable request.
Disclaimer/Publisher's Note
The statements, opinions and data contained in all publications are solely those of the individual author(s) and contributor(s) and not of EWA Publishing and/or the editor(s). EWA Publishing and/or the editor(s) disclaim responsibility for any injury to people or property resulting from any ideas, methods, instructions or products referred to in the content.
About volume
Volume title: Proceedings of the 2023 International Conference on Management Research and Economic Development
© 2024 by the author(s). Licensee EWA Publishing, Oxford, UK. This article is an open access article distributed under the terms and
conditions of the Creative Commons Attribution (CC BY) license. Authors who
publish this series agree to the following terms:
1. Authors retain copyright and grant the series right of first publication with the work simultaneously licensed under a Creative Commons
Attribution License that allows others to share the work with an acknowledgment of the work's authorship and initial publication in this
series.
2. Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the series's published
version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgment of its initial
publication in this series.
3. Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) prior to and
during the submission process, as it can lead to productive exchanges, as well as earlier and greater citation of published work (See
Open access policy for details).