The impact of tournament incentives on corporate credit repair: Evidence from China
Jianxiu Wang, Yuntian You, Yuanxiang Dong, Rongwang Guo
TL;DR
This paper examines how competition among executives in Chinese companies affects their ability to repair corporate credit, finding that tournament incentives can help.
Contribution
The study introduces tournament incentives as a novel factor influencing corporate credit repair and re-repair in Chinese firms.
Findings
Tournament incentives positively impact corporate credit repair and re-repair.
CEO shareholding strengthens the positive effect of tournament incentives on credit repair.
Firm age and size weaken the impact of tournament incentives on credit repair and re-repair.
Abstract
This study investigates the impact of tournament incentives on corporate credit repair and re-repair. Drawing on tournament and agency theory, respectively, we argue that tournament incentives improve corporate credit repair and re-repair by motivating non-CEO executives' effort and risk-taking, and by inducing incumbent CEOs to supervise subordinates to restrain opportunistic behavior. Using data from Chinese listed companies from 2009 to 2023 and employing SHAP values and benchmark traditional econometric methods, our results show that tournament incentives have a positive impact on corporate credit repair and re-repair. Furthermore, CEO shareholding strengthens the positive impact of tournament incentives on corporate credit repair, whereas firm age weakens the positive impact of tournament incentives on corporate credit repair. Additionally, firm size and leverage weaken the…
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Taxonomy
TopicsCorporate Finance and Governance · Working Capital and Financial Performance · Corporate Insolvency and Governance