Executive Equity Incentives and Abnormal Related Party Transactions: Restraint or Intensification

PENG Shao-bing; SONG Bing-jie; WANG Yu

Volume 36 Issue 2

May 2021

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PENG Shao-bing, SONG Bing-jie, WANG Yu. Executive Equity Incentives and Abnormal Related Party Transactions: Restraint or Intensification[J]. Journal of Guangdong University of Finance & Economics, 2021, 36(2): 54-68.

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PENG Shao-bing, SONG Bing-jie, WANG Yu. Executive Equity Incentives and Abnormal Related Party Transactions: Restraint or Intensification[J]. Journal of Guangdong University of Finance & Economics, 2021, 36(2): 54-68.

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Executive Equity Incentives and Abnormal Related Party Transactions: Restraint or Intensification

1.
School of Accounting, Southwestern University of Finance and Economics, Chengdu 611130
2.
School of Accounting, Guizhou University of Finance and Economics, Guiyang 550025, China

Received Date: 2020-09-06
Available Online: 2021-05-06
Publish Date: 2021-03-28

Abstract

Abstract

From the unique perspective of whether executive equity incentive can inhibit the behavior that damages the value of the company, this paper systematically analyzes and tests the impact and mechanism of executive equity incentive on abnormal related party transactions. In order to overcome the selective bias, this paper uses the PSM-DID method to conduct empirical test. The results show that there is a significant negative relationship between executive equity incentive and abnormal related party transactions, indicating that the executive equity incentive of Chinese listed companies inhibits abnormal related party transactions and supports the optimal contracting theory; cross-sectional tests demonstrate that executive equity incentive has significant negative impact on abnormal related party transactions; the mechanism test shows that the management has a strong incentive to improve the performance of company after the implementation of equity incentive plans, so as to restrain related party transactions that damage the company's value. It is verified that the implementation effect of executive equity incentive in Chinese listed companies conforms to the optimal contracting theory rather than the managerial power theory. It could also provide empirical evidence for the implementation of equity incentive by CSRC.
- equity incentive,
- abnormal related party transaction,
- executive equity,
- corporate governance,
- executive of listed company

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References(44)

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