Job market paper · JEL G12 · G23 · G30 · J30 · M12
Stock Liquidity, Mutual Fund Ownership, and CEO Pay–Performance Sensitivity: Evidence from China
with Konstantinos Baltas and Iftekhar Hasan
In China, where CEO pay responds to accounting performance rather than stock returns, stock liquidity and mutual-fund ownership each causally steepen the slope of pay in ROA — identified from staggered margin-trading eligibility and flow-induced fund trading.
Abstract
Chinese CEO pay responds to accounting performance, not stock returns, concentrating governance pressure on one margin: the slope of pay in ROA. Using A-share firms from 2006 to 2025, we show that stock liquidity and mutual-fund ownership causally steepen this slope. Fund ownership is instrumented by flow-induced trading; liquidity by staggered eligibility for margin trading and short selling, with treated firms matched to controls on the exchanges’ selection criteria. The two effects are mutually robust and fade where CEO equity wealth is already tied to the stock price — consistent with liquidity and fund ownership disciplining pay through voice and exit.
PDFSSRN
Working paper · JEL G14 · J33 · M12 · M41
Volatility-Based Incentives and Uncertainty
with Yilin Wu
How CEOs’ volatility-based incentives (Vega) affect the uncertainty reflected in firms’ accounting disclosures and audits.
PDFSSRN
Work in progress · sole author · JEL J30 · G30 · M12
Managerial Incentives and Inefficient Investment
Inefficient investment is more pronounced where executives’ option wealth is more closely tied to the stock price — and much of the well-known Delta–capex relation reflects this distortion rather than better investment opportunities.
Abstract
We examine the effect of executive equity incentives on inefficient investment, including over-investment and under-investment, and find that inefficient investment is more pronounced at firms where executives’ wealth from stock option holdings is more closely tied to the firm’s stock price, with the interpretation that such executives face greater stock-price risk so have stronger incentives to distort investment decisions in order to temporarily stabilize or boost stock prices. In addition, we find that these firms tend to exhibit higher capital expenditures, a substantial portion of which can be attributed to inefficient investment.
