Executive compensation controls and corporate cash holdings.
As a crucial component of internal corporate governance, remuneration controls possess the potential to influence the cash holdings of firms. However, identifying the causal relationship between these controls and such holdings presents a considerable challenge. To address this research gap, this pa...
| Main Authors: | , , , |
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| Format: | Article |
| Language: | English |
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Public Library of Science (PLoS)
2023-01-01
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| Series: | PLoS ONE |
| Online Access: | https://journals.plos.org/plosone/article/file?id=10.1371/journal.pone.0285387&type=printable |
| _version_ | 1797686816450543616 |
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| author | Peiqiong Wang Xianhua Zhang Taozhi Wang Zilu Wan |
| author_facet | Peiqiong Wang Xianhua Zhang Taozhi Wang Zilu Wan |
| author_sort | Peiqiong Wang |
| collection | DOAJ |
| description | As a crucial component of internal corporate governance, remuneration controls possess the potential to influence the cash holdings of firms. However, identifying the causal relationship between these controls and such holdings presents a considerable challenge. To address this research gap, this paper leverages the implementation of China's Guidance on Further Regulating the Remuneration Management of Heads of Central Enterprises as a quasi-natural experiment to investigate the relationship between executive remuneration controls and firms' cash holdings, utilizing a double-difference approach. Based on an analysis of a sample of listed companies from 2007-2012, the results indicate that firms subject to regulated executive compensation exhibit lower cash holdings. To ensure the robustness of these findings, various statistical techniques such as parallel trend tests, variable replacement, propensity score matching, and placebo tests were employed. Additionally, a mechanism test was conducted, whereby the mediating effect of executive compensation controls on firms' cash holdings was examined, revealing a reduction in internal agency costs. Finally, the analysis of heterogeneity demonstrated that the impact of executive compensation controls on firms' cash holdings was more pronounced in companies with high-quality internal controls, stronger management oversight, and lower information asymmetry. |
| first_indexed | 2024-03-12T01:10:15Z |
| format | Article |
| id | doaj.art-e32ce049c70c4ce0a573ca1133648274 |
| institution | Directory Open Access Journal |
| issn | 1932-6203 |
| language | English |
| last_indexed | 2024-03-12T01:10:15Z |
| publishDate | 2023-01-01 |
| publisher | Public Library of Science (PLoS) |
| record_format | Article |
| series | PLoS ONE |
| spelling | doaj.art-e32ce049c70c4ce0a573ca11336482742023-09-14T05:31:30ZengPublic Library of Science (PLoS)PLoS ONE1932-62032023-01-01189e028538710.1371/journal.pone.0285387Executive compensation controls and corporate cash holdings.Peiqiong WangXianhua ZhangTaozhi WangZilu WanAs a crucial component of internal corporate governance, remuneration controls possess the potential to influence the cash holdings of firms. However, identifying the causal relationship between these controls and such holdings presents a considerable challenge. To address this research gap, this paper leverages the implementation of China's Guidance on Further Regulating the Remuneration Management of Heads of Central Enterprises as a quasi-natural experiment to investigate the relationship between executive remuneration controls and firms' cash holdings, utilizing a double-difference approach. Based on an analysis of a sample of listed companies from 2007-2012, the results indicate that firms subject to regulated executive compensation exhibit lower cash holdings. To ensure the robustness of these findings, various statistical techniques such as parallel trend tests, variable replacement, propensity score matching, and placebo tests were employed. Additionally, a mechanism test was conducted, whereby the mediating effect of executive compensation controls on firms' cash holdings was examined, revealing a reduction in internal agency costs. Finally, the analysis of heterogeneity demonstrated that the impact of executive compensation controls on firms' cash holdings was more pronounced in companies with high-quality internal controls, stronger management oversight, and lower information asymmetry.https://journals.plos.org/plosone/article/file?id=10.1371/journal.pone.0285387&type=printable |
| spellingShingle | Peiqiong Wang Xianhua Zhang Taozhi Wang Zilu Wan Executive compensation controls and corporate cash holdings. PLoS ONE |
| title | Executive compensation controls and corporate cash holdings. |
| title_full | Executive compensation controls and corporate cash holdings. |
| title_fullStr | Executive compensation controls and corporate cash holdings. |
| title_full_unstemmed | Executive compensation controls and corporate cash holdings. |
| title_short | Executive compensation controls and corporate cash holdings. |
| title_sort | executive compensation controls and corporate cash holdings |
| url | https://journals.plos.org/plosone/article/file?id=10.1371/journal.pone.0285387&type=printable |
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