Government’s say-on-pay policy and corporate risk-taking: Evidence from China

Kun Su, Haiyan Jiang*, Gary Tian

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

17 Citations (Scopus)
20 Downloads (Pure)


This paper investigates whether the restriction on executive compensation in Chinese state-owned enterprises (SOEs) imposed by the Government's say-on-pay schemes is conducive to corporate risk taking. Using a sample of listed SOEs over the period 2005–2018, we find that the restriction on executive compensation is negatively associated with corporate risk taking, suggesting that regulatory intervention in executive pay may produce unintended consequences. Our analyses also demonstrate that this negative regulatory effect on corporate risk taking is driven by listed SOEs in the growth stage of the business life cycle and by those in the provinces with a significant degree of government intervention. An additional test shows that the negative effect of the pay restriction on risk taking disappears in the SOEs in which managers hold shares, suggesting that an alignment of interests between managers and other shareholders mitigates the negative effect of the pay restriction. Our finding is robust to a batch of tests to alleviate the concerns about self-selection and reverse causality.

Original languageEnglish
Pages (from-to)561-601
Number of pages41
JournalAbacus: A Journal of Accounting, Finance and Business Studies
Issue number4
Early online date17 Nov 2020
Publication statusPublished - 1 Dec 2020


  • China
  • Executive compensation
  • Government intervention
  • Life cycle
  • Risk taking


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