The Effects of Executive Compensation Incentive on Implicit Corruption in China Based on Multiple Linear Regression Model

Abstract

This study investigates whether and how executive compensation incentives improve the governance of corporate implicit corruption based on multiple linear regression model. In addition to compensation level/amount adopted in related researches under Chinese context, executive compensation incentives involve the incentive intensity measured by sensitivity between compensation and performance. It is found that executive compensation incentives have significant impacts on power-induced implicit corruption. Specifically, increasing the performance-based compensation incentive intensity may curb power-induced implicit corruption. However, merely raising the compensation is effective only when executives are in low-pay level. Our study provides an important internal governance perspective for implicit corruption based on the executive compensation incentive mechanism.