Cost Stickiness, Corporation Governance and Executive Pay—Performance Sensitivity——An Empirical Research Based on the Risk Perspective

Abstract

Abstract: Cost stickiness is an important characteristic in the manufacturing firms, reflecting the operational risks in the role of industry property, asset characteristics and executive decision. Using the manufacturing firms in the period of 2005-2012 as sample, we examine the relationship between cost stickiness and executive pay—performance sensitivity, and the regulation of corporate governance factors on the above relationship. We find the cost stickiness significantly lowers the executive PPS. Further analysis shows that cost stickiness has significant negative relationship with executive PPS in the non-SOE comparing to SOE. Third, the above relationship is more significant when CEO's tenure is longer. Forth, the negative relationship between cost stickiness and executive PPS will be more significant in the firms with lower transparency. However, these conclusions do not appear in state-owned enterprises.

Key words: corporation governance, cost stickiness, executive pay—performance sensitivity

Xie Huobao, Hui Lili. Cost Stickiness, Corporation Governance and Executive Pay—Performance Sensitivity——An Empirical Research Based on the Risk Perspective[J]. , 2017, 29(3): 110-125.

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