The Impact Of CEO's External Pay Gap On Corporate Risk-taking

In China's A-share listed companies,some CEOs' sky-high compensation has attracted a lot of attention.Although people realize the importance of CEOs for business operations,excessive compensation still being questioned by many people.In the past research,people found that there is a promotion incentive mechanism in the form of tournaments.Will managers who have already served as CEOs in the company turn their attention to benchmarking companies in the industry in order to obtain the CEO position of other company? Whether the CEO's pay gap in the industry will affect its investment decision is worth considering.In order to improve the company's performance,will the CEO raise the risk-taking of the company? With the external flow of talents sufficient,the probability of CEOs moving to other companies increases.Will the incentive effect of such industry tournaments be enhanced? The CEO's industry pay gap can't directly affect the risk-taking of the company.So what kind of mechanism is working? If the industry championship incentives really improve the risk-taking of the company,does it also improve the performance of the company? This paper takes the Chinese A-share listed companies in 2005-2017 as a sample to study the impact of CEO's external pay gap on corporate risk-taking,and further studies the impact of CEO's labor market on the incentive effect,and discusses the external pay gap of CEO.The mechanism of action between corporate risk taking and the final effect on company.Based on the influencing factors of corporate risk-taking,the influence of executive incentives on corporate risk-taking and the incentive effect,this paper sorts out the research results of senior academic incentives and corporate risk-taking in the current academic circles.Based on the theory of tournaments incentives,this paper focuses on the impact of CEO industry championships on corporate risk taking.Based on the " tournaments incentives theory",this paper selects the data of China's A-share listed companies from 2005 to 2017 as a sample,and uses fixed-effect panel regression to study the relationship between CEO's external pay gap and corporate risk-taking.In the empirical part,this paper uses the three-year and five-year industryadjusted corporate performance volatility-the volatility of the return on net assets as the proxy variables of risk-taking,and the relationship between the external pay gap of CEO and the risk-taking of the corporate.A detailed study.The empirical results show that:(1)The CEO external pay gap has a significant positive correlation with the corporate risk-taking.The CEO's industry tournaments incentives exist.When the external pay gap of the CEO's industry is larger,The level of risk-taking is also greater;(2)In the adjustment of the absolute external employment ratio,the higher the external employment ratio of the CEO,the greater the impact of the CEO's external pay gap on the risk-taking of the corporate;(3)This paper studies the external pay of the CEO.For the channel of corporate risk-taking,under the CEO's external pay gap incentives,the company's M&A activity and R&D intensity will increase significantly,while capital expenditure will decrease significantly.(4)Further research in this paper finds that industry tournament incentives can improve corporate performance.In the robustness test,the above conclusions were tested by replacing the risktaking indicators,the instrumental variable method,the sub-samples of state-owned enterprises and non-state-owned enterprises,and the innovative enterprises.The CEO's external pay gap was discussed from more angles.The relationship between corporate risk takings verifies the hypothesis of this paper—the greater the external pay gap of CEOs,the greater the risk exposure of enterprises.Finally,the paper puts forward relevant policy recommendations based on the empirical conclusions.This paper takes the industry tournaments incentives as the starting point,studies the relationship between CEO external compensation incentives and corporate risk-taking,enriches the research literature of CEO incentives and corporate risk-taking,and provides a new research perspective for CEO incentive research.In addition,this paper also discusses the impact of labor market flows of CEOs in the industry on the incentives of CEO industry tournaments,studies the impact of the interaction between the two on corporate risk-taking,and analyzes the mechanism of interaction between CEO and corporate risk-taking.And the effect of the role,provides a reference for the design of corporate compensation design and industry incentive mechanism.