Do government say-on-pay policies distort managers’ engagement in corporate social responsibility? Quasi-experimental evidence from China

Haiyan Jiang, Yuanyuan Hu, Kun Su*, Yanhui Zhu

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

Abstract

Against the backdrop of a series of regulations issued by the Chinese Government in an effort to rein in top executives’ compensation in state-owned enterprises, this study investigates whether the exogenous shock resulting from restricting top executives’ pay levels modifies their incentives to conduct socially responsible activities. Our analyses, using a baseline regression and a difference-in-differences (DiD) approach, both reveal that the pay restriction on top executives imposed by the government adversely affects firms’ CSR performance. The results hold after conducting tests to alleviate the concerns about possible self-selection bias and reverse causality between the pay restriction and CSR. In addition, we reveal that the negative effect of the pay restriction on CSR is alleviated in regions with a high level of social capital, suggesting that the social expectation of firms serves as an influential factor in managers’ CSR decisions. Meanwhile, managerial shareholding mitigates the negative effect of the pay restriction on CSR performance because of an alignment of interests between managers and other stakeholders.
Original languageEnglish
Article number100259
Pages (from-to)1-16
Number of pages16
JournalJournal of Contemporary Accounting and Economics
Volume17
Issue number2
DOIs
Publication statusPublished - Aug 2021

Keywords

  • Quasi-experiment
  • Government Say-on-Pay Policies
  • CSR Performance
  • Social Capital
  • China

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