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This paper aims to examine how the use of environmental, social and governance (ESG) incentives intersects with top management power and various corporate governance mechanisms to affect excess annual cash bonus compensation.

The authors use a novel artificial intelligence (AI) technique to obtain data about ESG incentives use by firms in the S&P 500. The authors test the hypotheses with an endogenous treatment-regression and a contrast test.

When the top management team has power and uses ESG incentives, there is a 32% reduction in excess annual cash bonuses implying ESG incentives are an effective corporate governance tool. However, nuanced analyses reveal that when powerful management teams with ESG incentives are from environmentally sensitive industries, have a corporate social responsibility (CSR) committee or have long-term view institutional shareholders, they derive excess bonuses.

Stakeholders will better understand management’s motivations for the inclusion of ESG incentives in executive compensation contracts and be able to identify situations which require closer scrutiny.

Given the increased popularity of ESG incentives, society, regulators, boards of directors and management teams will be interested in better understanding when these incentives might be effective and when they might be abused.

To the best of the authors’ knowledge, this study is the first to examine the use of ESG incentives in relation to excess pay. The authors contribute to both the CSR and executive compensation literatures. The work also uses a new methodological technique using AI to gather difficult-to-obtain data, opening new avenues for research.

This paper aims to explore the relationship between the readability of sustainability reports and chief executive officer (CEO) attributes, comprising monetary, non-monetary incentives and personal characteristics.

The study is based on an international sample of companies operating in sustainability-sensitive industries during 2016–2018.

The results prove that CEO monetary incentives, as well as CEO non-monetary incentives, negatively influence the readability of sustainability reports, revealed in a positive relationship with readability indexes, by providing reports with greater reading difficulty. Additionally, this study shows evidence about the relation of complementarity between these incentives. Other CEO characteristics have no significant effect on the readability of sustainability reports.

This research sheds the light on the role of CEO incentives in obfuscating sustainability information to portray the company, operating in sustainability-sensitive industries, in a favorable image.

This paper examines how a firm's hierarchical complexity, which is determined by the way it organizes its subsidiaries across the hierarchical levels, can impact its stock price crash risk.

The authors employ a measure of hierarchical complexity that captures the depth and breadth of how subsidiaries are organized within a firm. This measure is calculated using information about firms' subsidiaries extracted from the Bureau van Dijk (BvD) database that allows the authors to construct each firm's hierarchical structure. The data sample includes 2,461 USA firms for the period from 2012 to 2017 (11,006 firm-year observations). Univariate tests and panel regression are used for the main analysis. Two-stage-least-squares (2SLS) instrumental variable regression and various other tests are employed for robustness check.

The results show a positive relationship between hierarchical complexity and stock price crash risk. This relationship is amplified in firms with a greater number of subsidiaries that are hierarchically distanced from the parent company as well as in firms with a greater number of foreign subsidiaries in countries with weaker rule of law.

This paper is the first to investigate the impact hierarchical complexity has on crash risk. The results highlight the role that a firm's organizational structure can have on asset pricing behavior.

Rapidly increasing the proportion of installed wind power capacity with zero carbon emission characteristics will help adjust the energy structure and support the realization of carbon neutrality targets. The intermittency of wind resources and fluctuations in electricity demand has exacerbated the contradiction between power supply and demand. The time-of-use pricing and supply-side allocation of energy storage power stations will help “peak shaving and valley filling” and reduce the gap between power supply and demand. To this end, this paper constructs a decision-making model for the capacity investment of energy storage power stations under time-of-use pricing, which is intended to provide a reference for scientific decision-making on electricity prices and energy storage power station capacity.

Based on the research framework of time-of-use pricing, this paper constructs a profit-maximizing electricity price and capacity investment decision model of energy storage power station for flat pricing and time-of-use pricing respectively. In the process, this study considers the dual uncertain scenarios of intermittency of wind resources and random fluctuations in power demand.

(1) Investment in energy storage power stations is the optimal decision. Time-of-use pricing will reduce the optimal capacity of the energy storage power station. (2) The optimal capacity of the energy storage power station and optimal electricity price are related to factors such as the intermittency of wind resources, the unit investment cost, the price sensitivities of the demand, the proportion of time-of-use pricing and the thermal power price. (3) The carbon emission level is affected by the intermittency of wind resources, price sensitivities of the demand and the proportion of time-of-use pricing. Incentive policies can always reduce carbon emission levels.

This paper creatively introduced the research framework of time-of-use pricing into the capacity decision-making of energy storage power stations, and considering the influence of wind power intermittentness and power demand fluctuations, constructed the capacity investment decision model of energy storage power stations under different pricing methods, and compared the impact of pricing methods on optimal energy storage power station capacity and carbon emissions.

1. Electricity pricing and capacity of energy storage power stations in an uncertain electricity market.

2. Investment strategy of energy storage power stations on the supply side of wind power generators.

3. Impact of pricing method on the investment decisions of energy storage power stations.

4. Impact of pricing method, energy storage investment and incentive policies on carbon emissions.

5. A two-stage wind power supply chain including energy storage power stations.

Electricity pricing and capacity of energy storage power stations in an uncertain electricity market.

Investment strategy of energy storage power stations on the supply side of wind power generators.

Impact of pricing method on the investment decisions of energy storage power stations.

Impact of pricing method, energy storage investment and incentive policies on carbon emissions.

A two-stage wind power supply chain including energy storage power stations.

This study examines the impact of chief executive officer (CEO) power, institutional investors and their interaction on green financing provided by Bangladeshi financial institutions and the moderating effect of government policy and CEO political connections on these relations.

We employ ordinary least squares (OLS) regressions and interaction terms among variables of interest for the empirical analysis.

Green financing decreases with CEO power, implying that CEOs of this country’s financial institutions are averse to green loans, whereas institutional investors increase green financing extended by these institutions. The government policy, which includes financial incentives for complying financial institutions, strengthens institutional investors' positive impact on green financing, but it does not change CEOs' aversion to green loans. Institutional investors have a positive moderating effect on the relationship between green finance (GF) and CEO power, but this positive moderating effect is negated in banks where the government owns a stake, possibly because CEOs of state-owned financial institutions are politically connected, which reduces institutional investors’ influence over them.

This study is unique in that it is the first to examine how the interaction among different stakeholders affects green financing in a unique setting. As the literature is almost silent on this topic, the findings of this paper are expected to raise policymakers’ awareness of the obstacles that hamper the efforts of developing countries to go green.

This paper aims to examine the relationship between executive pay disparity and the cost of debt.

The authors use a sample of syndicated bank loans granted to United States (US) listed firms from 1992 to 2014 and adopt the loan yield spread (Chief Executive Officer (CEO) pay slice) as the main proxy for the cost of debt (executive pay disparity). The authors also use the Heckman two-stage model to address the sample selection bias and the two-stage least squares and propensity score matching methods to control the potential endogeneity issues. To test different views about executive pay disparity, the authors adopt the cash-to-stock ratio to proxy for managerial risk-shifting incentives.

The authors find that the cost of debt is significantly higher for firms with larger executive pay disparity, which is robust to sample selection bias, endogeneity concerns, alternative measures and various controls. This positive relationship increases with the risk-shifting incentives of CEOs instead of other top executives, which supports the managerial power view, and is stronger for firms with higher levels of financial distress. The findings suggest that creditors view executive pay disparity are associated with higher credit risk and CEO entrenchment.

This paper reveals one “dark” side of executive pay disparity: it increases the cost of debt and identifies a significant role played by CEOs' risk-shifting incentives. The authors provide direct evidence of the relevance of pay differential to corporate credit analysis.

The existing literature involving director compensation has been concentrating on its absolute or intrinsic values. Although the relevant studies have generated mixed findings, research in other fields suggests that the power of an incentive may be determined by its value relative to the chosen referencing standard more than its absolute value. This study aims to investigate how relative director pay affects corporate investment efficiency.

This study takes a fresh theoretical viewpoint by framing the investigation using the dimensional comparison theory and proposing that a directorship also presents a relative value that may influence the board’s performance. Ordinary least squared regressions and two-stage system generalised method of moments are used to analyse 14,267 firm-year observations.

The empirical results suggest that the relative director pay is a better estimate of the power of the incentive than the absolute pay. A positive association between the relative director pay and investment efficiency is evident, while the absolute pay has no significant effect on investment decisions. Director overcompensation, however, will cancel out the positive effect of director compensation on investment efficiency. Firms with relatively lower unexpected investment (UI) level benefit the most from an increase in the relative director pay, while neither absolute nor relative director pay affects investment choices in firms with a high UI level because of significantly more overcompensation.

To the best of the authors’ knowledge, this study is the first attempt to investigate the effect of relative director pay. It is also the first to examine the role of dimensional comparison in strategic decisions which is the single untended comparison framework in the director pay design. The current director pay structure has emphasised social and temporal equality by standardising the pay structure and vesting the equity-based pay over a long period. Yet it ignores the fact that people decide their commitment level by comparing the reward with an internal referent too. The findings speak to the dimensional comparison theory in that the inequality emanated from dimensional or internal comparison may be accentuated by the perceived equality in other comparison frameworks, driving the different performances in the roles one assumes.

This study aims to investigate whether integrating environmental, social and governance (ESG) practices mediates the relationship between executive incentive compensation and the financial performance of Islamic and conventional banks in the Middle East and North Africa (MENA) region.

This study used multiple regression models to analyze the effectiveness of ESG practices as a mediating variable in explaining the relationship between executive incentive compensation and banks’ financial performance between 2015 and 2021. The sample consisted of 57 Islamic and conventional banks operating in the MENA region, and the data were collected from the Thomson Reuters database (Data Stream).

This research paper showed the positive and significant mediating effect of the ESG practice on Banks’ financial performance. Thus, banks’ financial and stock market profitability is influenced by ESG information disclosure. This finding shows that taking ESG into account improves the relationship between executive incentive compensation and banks’ financial performance.

The results may interest academic researchers, regulators and policymakers and would support stakeholders and decision-makers who wish to discover how executive incentive compensation affects financial performance in banks.

This study contributes to previous literature by studying the mediating effect of ESG practices on the relationship between executive incentive compensation and banks’ financial performance. Indeed, the originality of this research paper is justified by the scarcity of studies and, to the best of the authors’ knowledge, constitutes one of the first attempts to examine this relationship via a mediating variable, i.e. ESG.

This paper offers a new perspective on the potential motivation for the adoption of employee ownership based on market power. Employee ownership may be linked to market power, either through contributing to firm growth that leads to market power or through industry leaders adopting employee ownership as part of rent sharing or a broader consolidation of market position. Both employee stock ownership plan (ESOP) coverage and product market concentration (PMC) have been increasing in the past two decades, providing a good opportunity to see if and how these are related.

The authors predict ESOP adoption and termination using multilevel regressions based on 2002–2012 firm- and industry-level data from the Census Bureau, Compustat and Form 5500 pension datasets.

The authors find that the top four firms in concentrated industries are more likely to adopt Employee Stock Ownership Plans (ESOPs), while having an ESOP does not predict entering the top four, apart from firm-level predictors. Tests indicate the first result does not reflect simple rent sharing with employees but instead appears to reflect an effort by firms to consolidate market power through the attraction and retention (or “locking in”) of industry talent. Other positive predictors of ESOPs include company size, being in a high-wage industry and having a defined benefit (DB) pension.

To better distinguish among hypotheses, it would be helpful to have firm-level data on managerial attitudes, strategies, networks and monopsony measures. Therefore, future research using such data would be highly useful and encouraged.

The paper includes implications for the potential usefulness of ESOPs in attracting and retaining talent and for the design of nuanced policy to encourage more broadly based sharing of economic rewards.

While prior research focuses on firm-level predictors of employee ownership, this study uses market concentration and other industry-level variables to predict the use of ESOPs. This study makes a unique contribution, broadening the current thinking on firm motives and environmental conditions predictive of firm ESOP adoption.

Much prior work involving director incentives and corporate behaviour has been focussing on their absolute dollar value or the intrinsic value and generated mixed findings. Comparison theories, however, suggest that the relative value of an incentive may be the main drive for individual performance. This study attempts to investigate the role of director relative pay in promoting the board’s intervention with unrelated diversification decisions.

The analysis uses data from firms operating in more than one segment during the period from 1999 to 2019. Data were obtained from WRDS databases. Ordinary least squares (OLS) regression analysis and the two-stage system generalized method of moments (GMM) were run to test the hypotheses. To test the robustness of the findings, alternative proxies for the key independent variables were used in separate analyses.

The results support the hypothesis that unrelated diversification negatively impact firm performance, while higher director relative pay will help reduce unrelated business diversification. The absolute director pay, however, has no significant impact on corporate strategic choices. The results also highlight the moderating effect of director overcompensation. Director overcompensation will cancel out the impact of relative director pay on unrelated diversification.

This study takes a fresh theoretical perspective by framing the investigation using the dimensional comparison theory to address the single untended comparison framework in the director pay structure – the intra-individual framework. It is the first to investigate the role of director relative pay in corporate strategic choices. The findings support the contention that the relative value of the incentive is an important indicator of the effectiveness of the pay.