Executive compensation adjustment and the risk of stock price

Authors

  • Zhixuan Li

DOI:

https://doi.org/10.54097/754x8p69

Keywords:

salary adjustment; stock price crash risk; executive power.

Abstract

Based on the 'convergence of interests' hypothesis, rational people hypothesis, and management information hiding hypothesis. This study uses the 2023 Fortune 500 as its research object to analyze the effects of executive remuneration adjustment on the danger of the stock price crash. The research shows that when the board of directors can effectively supervise the executives, the company's adjustment of the number of executive compensation will help to improve the incentive efficiency, promote the " convergence of interests " between executives and shareholders, relieve the agency problem, and then inhibit the crash of company's stock price. When the senior executive power gradually expands and loses control, the salary adjustment may be a manifestation of the executives seeking personal benefits, which not only does not help to solve the agency problem but may even become a part of the agency problem, which in turn increases the chance that the company's stock price may drop.

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Published

29-03-2024

How to Cite

Li, Z. (2024). Executive compensation adjustment and the risk of stock price. Highlights in Science, Engineering and Technology, 88, 1050-1055. https://doi.org/10.54097/754x8p69