Talent Signaling or Compensation Justification: Excess Executive Compensation and Information Disclosure on Strategy
CHENG Xinsheng, LIU Jianmei, CHEN Jinghan
China Academy of Corporate Governance /Business School, Nankai University; Business School,Tianjin University of Finance ＆ Economics; Business School, Southampton University
Abstract:
This paper examines whether executives disclose more information on strategy(SID)when whey obtain excess compensation, and further examines whether the motivation is consistent with the Management talent signaling hypothesis or Justifying Compensation hypothesis. We find excess compensation and SID is positively related, and this relation is more likely to happen when the company is SOEs, especially central enterprises, when the PPS is lower or when the institutional investors holding is lower, which is consistent with Justifying Compensation hypothesis. That means when executives obtain excess compensation, whey will disclose more SID to show their false ability in order to improve their compensation’s legitimate and rationality. This paper studies information disclosure motivation from the executive justifying compensation perspective, extending the research on information disclosure incentives in the context of developing countries.
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