Political Connections, Executive Incentive and Capital Structure

Abstract

Abstract:

The relationship between executive incentive and capital structure has been a hot research point of scholars. The effectiveness of incentive will have an impact on managers' behavior and then affect the capital structure. This paper makes an empirical research into a large number of enterprises listed in Shanghai and Shenzhen during the period 2007-2012 and finds that there is a significant non-mon-otonic relationship between executive incentive and capital structure. There is also strong evidence suggesting that political connections have a significant impact on the relationship between stock incentive and capital structure. More importantly, the results reveal that the impact of political connections on the relationship between executive incentive and capital structure depends on the enterprise nature.

Key words: political connections, executive incentive, capital structure

Zhao Yuheng, Xing Lihui, Sun Yue. Political Connections, Executive Incentive and Capital Structure[J]. , 2016, 28(11): 150-161.

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