CEO incentive compensation and stock liquidity

Hongrui Feng, Shu Yan

Research output: Contribution to journalArticlepeer-review

8 Scopus citations


We document that the CEO pay-for-performance incentive positively predicts firm’s stock liquidity. The evidence is consistent with the hypothesis that, to mitigate their undiversified price risk and reduce the transaction costs, CEOs with high pay-for-performance incentive compensations exert extra efforts in shaping firms’ information environment to improve stock liquidity. We further identify three internal and two external channels through which incentivized CEOs stimulate firms’ stock liquidity. Specifically, we find that firms with highly incentivized CEOs tend to provide earnings guidance, file more readable 10-K reports, and perform more stock splits. In addition, these firms attract larger analyst following and have lower earnings forecast dispersions.

Original languageEnglish (US)
Pages (from-to)1069-1098
Number of pages30
JournalReview of Quantitative Finance and Accounting
Issue number4
StatePublished - Nov 1 2019

All Science Journal Classification (ASJC) codes

  • Accounting
  • Business, Management and Accounting(all)
  • Finance


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