Executive Salary Stickiness, Equity Mix And Corporate Innovation Investment

"Innovation-driven development" is an important strategic support for improving China's social productivity and comprehensive national power,as well as an important guarantee for achieving high-quality and sustainable economic development in China;the key to the success of this strategy lies in how enterprises,which are at the core of innovation,can improve their innovation capacity and enhance their core competitiveness.Executives,as the actual operators of the business,play a vital role in the formulation of the company's strategic objectives and the decision making of innovative investment activities.Due to the inconsistency between the objectives of the company's shareholders and executives,and the fact that corporate innovation itself is characterized by long cycles and high risks,it leads to serious ex ante risk aversion on the part of executives,which is not conducive to active innovation investment activities by executives.By setting a reasonable compensation contract,enterprises can align the interests of executives and enterprises,which is conducive to motivating executives to work and creativity.However,in practice,most enterprises develop executive compensation systems based on optimal contract theory,which emphasizes a strict link between executive compensation and enterprise performance,making compensation contracts ineffective in motivating innovation activities that often face failure in the early stages.In view of this,the scholars concerned,on the basis of an in-depth study of enterprise innovation and standard performance pay mechanisms,have proposed a theory of failure tolerance that is conducive to motivating executives to innovate.Executive compensation stickiness reflects the phenomenon of "rewarding executives more and punishing executives less" in the process of enterprise management,that is,giving executives more reward when the performance of the enterprise rises,and giving executives smaller penalties or even minor rewards when the performance declines,which to a certain extent reflects the tolerance of pay makers to the failure of management decision-making.Giving due consideration to the stickiness of executive compensation with more rewards and less punishment when formulating the executive pay contract,which is conducive to stimulating the adventurous spirit of executives and may have a positive impact on the level of innovation investment of enterprises.In China,state-owned enterprises play an important role in the main industries and fields related to national security and the lifeblood of the national economy,and with the rapid development of the economy,the disadvantages of the absence of owners and the rigid structure of state-owned enterprises have become increasingly obvious,seriously hindering the innovative development of state-owned enterprises;at the same time,compared with non-state-owned enterprises,the existence of multi-tasking orientation and administrative intervention makes state-owned enterprises take on more policy goals,resulting in the pay contract does not well motivate executives to make innovative investments.As an important direction in the reform of state-owned enterprises,the reform of the salary system and mixed ownership system are of great significance to stimulate the vitality of state-owned enterprises and improve their core competitiveness;under the classified governance of state-owned enterprises,different types of state-owned enterprises may have different effects of the pay incentive system and mixed ownership system reform in different types of state-owned enterprises due to their different functional positioning and objectives achieved.Based on this,this paper uses A-share state-owned listed companies as a sample to empirically analyze the impact of state-owned enterprise executive compensation stickiness on enterprise innovation investment and the moderating effect of equity mix on the two by establishing a regression model,and further subdivides state-owned enterprises into three types: competitive,public welfare and functional,to study the relationship between executive compensation stickiness,equity mix,and enterprise innovation investment under different categories of state-owned enterprises.The findings show that there is a sticky characteristic of "rewarding more than punishing" in executive compensation of state-owned listed companies in China,and the sticky executive compensation has a significant positive relationship with enterprise innovation investment,and the degree of equity mix has a positive moderating effect on the relationship between executive compensation stickiness and enterprise innovation investment;further classifying the state-owned enterprises,it is found that among competitive state-owned enterprises,the effect of executive compensation stickiness on innovation investment is more significant than that of public welfare and functional state-owned enterprises,and the positive moderating effect of equity mix on the relationship between executive compensation stickinessand innovation investment is also more significant when controlling for other conditions.The results of this paper show that the asymmetric nature of pay-performance sensitivity,as reflected in executive compensation stickiness,can effectively motivate executives to invest in innovation by mitigating their risk aversion to innovation activities by mitigating the penalties for their innovation failure.With the promotion of mixed ownership reform,the cross-penetration of capital of different nature and complementary advantages can improve the governance structure of state-owned enterprises,and improve the efficiency of their operation,while also reducing the policy burden of state-owned enterprises to a certain extent,thereby enhancing their tolerance to innovation risks and strengthening the positive promotion effect of the stickiness of executive remuneration on innovation investment in enterprises.The results of this paper have some reference value for the establishment of innovative incentive-based compensation systems in state-owned enterprises,and also have some reference significance for continuing to promote the reform of the classification and mixed ownership system of state-owned enterprises in China.