Executives Of Listed Companies Pay Incentive And Equity Incentive Substitution Effect

We exam the substitute effects of salary incentive and stock option incentive of CEO of listed firms from the perspective of accounting information noise. We find that accounting information noise can affect pay-performance sensitivity. A firm with higher accounting information noise has weaker pay-performance sensitivity and will have incentive to choose stock option. The substitute effects indeed exist between salary incentive and stock option incentive. The contribution of this paper is that we testify that stock option incentive is the substitute of salary incentive in China when pay-performance sensitivity is weak.