The Impact of Executive Compensation External Fairness on Corporate Innovation
DOI:
https://doi.org/10.54097/k58n8c34Keywords:
External Fairness in Executive Compensation; Corporate Strategy Risk Taking; Corporate Innovation.Abstract
In a competitive market environment, the innovation ability of an enterprise is not only crucial for its sustainable development but also essential for enhancing its core competitiveness among numerous competitors. As decision-makers and executives of an enterprise, the perceived external fairness of their compensation directly influences their attitudes towards risk and their willingness to engage in innovative activities. This paper focuses on A-share listed companies in Shanghai and Shenzhen from 2013 to 2022 as the research subject. The aim is to conduct an in-depth exploration of the potential relationship between external fairness of executive compensation and corporate innovation. Additionally, it will analyze the role of corporate strategic risk-taking as a bridge in this relationship, as well as the heterogeneous characteristics of the impact of executive compensation fairness on corporate innovation based on corporate property rights, regional differences, and industry characteristics. The study reveals that: (1) external fairness of executive compensation significantly promotes corporate innovation levels, particularly in non-state-owned enterprises, eastern regions, and high-tech industries; (2) corporate strategic risk-taking partially mediates the relationship between executive compensation fairness and corporate innovation. Based on these findings, this paper proposes improvements to listed companies' executive compensation incentive systems, internal oversight and governance systems within enterprises, as well as deeper market-oriented reforms for state-owned enterprises. These proposals aim to provide new insights for enhancing enterprise innovation levels.
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