Executive shareholding, compensation, and analyst forecast of Chinese firms

Wei Huang, Agyenim Boateng

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    Abstract

    We examine the impact of executive and leadership shareholding and cash compensation on analyst forecast error and dispersion as proxies for information asymmetry. We find that firms pay higher compensation (or excess compensation) to executives and directors are associated with higher information asymmetry. The positive association is stronger where executives’ and directors’ shareholdings are higher. Shareholding appears to facilitate managerial entrenchment and gives highly paid executives/leadership stronger structural power which adversely affects information disclosure leading to larger forecast error and dispersion. These results are robust to different measures of compensation and alternative models controlling for the predictability of firm-level earnings. Our findings indicate that executive/director shareholding and compensation do not provide sufficient incentives for information disclosure by Chinese firms.
    Original languageEnglish
    Pages (from-to)1459-1472
    Number of pages14
    JournalApplied Economics
    Volume49
    Issue number15
    Early online date3 Aug 2016
    DOIs
    Publication statusPublished - Jan 2017

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    Keywords

    • analyst forecasting
    • Chinese firms

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