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<p>This study examines the impact of executive compensation restrictions on the quality of corporate accounting information and the underlying mechanisms driving this relationship. Leveraging China’s 2015 compensation regulation as a quasi-natural experiment, we employ a Difference-in-Differences design using firm-level panel data from 2011 to 2023. We find that compensation restrictions significantly impair accounting information quality. Mechanism analyses indicate that this deterioration operates through three channels: exacerbated managerial myopia, weakened executive team stability, and heightened rent-seeking behavior. Cross-sectional analyses further reveal that these adverse effects are more pronounced in firms with weaker internal governance—specifically those with low ownership concentration, limited institutional investment, as well as those subject to limited external oversight, such as low media attention. These findings underscore the unintended consequences of rigid compensation controls and offer actionable insights for designing more balanced executive compensation frameworks in emerging markets.</p>

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Executive compensation restrictions and accounting information quality

  • 期刊论文

  • 发表日期：

    2026年8月3日

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  • Shuting Hou,
  • Xiaojuan Feng,
  • Shuangmiao Du,
  • Zhijian Yu

摘要

This study examines the impact of executive compensation restrictions on the quality of corporate accounting information and the underlying mechanisms driving this relationship. Leveraging China’s 2015 compensation regulation as a quasi-natural experiment, we employ a Difference-in-Differences design using firm-level panel data from 2011 to 2023. We find that compensation restrictions significantly impair accounting information quality. Mechanism analyses indicate that this deterioration operates through three channels: exacerbated managerial myopia, weakened executive team stability, and heightened rent-seeking behavior. Cross-sectional analyses further reveal that these adverse effects are more pronounced in firms with weaker internal governance—specifically those with low ownership concentration, limited institutional investment, as well as those subject to limited external oversight, such as low media attention. These findings underscore the unintended consequences of rigid compensation controls and offer actionable insights for designing more balanced executive compensation frameworks in emerging markets.