An empirical study on the impact of executive compensation incentives on the performance of Chinese pharmaceutical firms
- 1School of Business Administration, Shenyang Pharmaceutical University
- 2Drug Regulatory Research Base of NMPA, Research Institute of Drug Regulatory Science, Shenyang Pharmaceutical University
Abstract
As the “Healthy China” initiative continues to gain momentum, the pharmaceutical manufacturing industry is entering a pivotal phase of shifting from quantitative expansion toward innovation-driven growth. Senior executives, as the primary architects of firm strategic decisions, wield compensation incentives that profoundly affect resource allocation efficiency and long-term firm performance. Drawing on a panel dataset of A-share listed pharmaceutical firms on the Shanghai and Shenzhen stock exchanges over the period 2013–2024, this study empirically examines the impact of executive remuneration incentives on firm performance. Moreover, it investigates the mediating role of financing constraints and the moderating effect of firm growth, while also accounting for regional heterogeneity in the observed relationships. Our empirical findings yield several key insights. First, executive compensation incentives exert a significantly positive influence on firm performance. Second, financing constraints act as a mediator in the link between executive compensation incentives and firm performance. Third, firm growth moderates the effect of executive compensation incentives on firm performance. Fourth, the positive effect of executive compensation incentives on firm performance is significant in the eastern and central regions, but not in the western region. In the empirical investigation, we apply fixed effects, mediation, and moderation model specifications. To validate the reliability of our findings, we perform additional robustness checks by excluding atypical observations, employing alternative measures of the dependent variable, and adopting an instrumental variable approach. The primary results remain qualitatively unchanged under these alternative settings. Our study enriches the theoretical discourse on executive compensation and firm performance, while also delivering actionable insights for pharmaceutical firms regarding the design of incentive contracts, the alleviation of financing frictions, the adoption of regionally tailored incentive schemes, and the reduction of interregional imbalances. These findings further serve as an empirical foundation and policy reference for relevant stakeholders.
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BibTeX
@article{zhang2026empirical,
title = {{An empirical study on the impact of executive compensation incentives on the performance of Chinese pharmaceutical firms}},
author = {Huihui Zhang and Boyi Xu and Su Wang and Yuwen Chen},
journal = {Frontiers in Public Health},
year = {2026},
month = oct,
doi = {10.3389/fpubh.2026.1962847},
url = {https://www.frontiersin.org/articles/10.3389/fpubh.2026.1962847/full},
note = {CC BY 4.0},
}
RIS
TY - JOUR
TI - An empirical study on the impact of executive compensation incentives on the performance of Chinese pharmaceutical firms
AU - Huihui Zhang
AU - Boyi Xu
AU - Su Wang
AU - Yuwen Chen
PY - 2026
DA - 2026/10/23
JO - Frontiers in Public Health
DO - 10.3389/fpubh.2026.1962847
UR - https://www.frontiersin.org/articles/10.3389/fpubh.2026.1962847/full
AB - As the “Healthy China” initiative continues to gain momentum, the pharmaceutical manufacturing industry is entering a pivotal phase of shifting from quantitative expansion toward innovation-driven growth. Senior executives, as the primary architects of firm strategic decisions, wield compensation incentives that profoundly affect resource allocation efficiency and long-term firm performance. Drawing on a panel dataset of A-share listed pharmaceutical firms on the Shanghai and Shenzhen stock exchanges over the period 2013–2024, this study empirically examines the impact of executive remuneration incentives on firm performance. Moreover, it investigates the mediating role of financing constraints and the moderating effect of firm growth, while also accounting for regional heterogeneity in the observed relationships. Our empirical findings yield several key insights. First, executive compensation incentives exert a significantly positive influence on firm performance. Second, financing constraints act as a mediator in the link between executive compensation incentives and firm performance. Third, firm growth moderates the effect of executive compensation incentives on firm performance. Fourth, the positive effect of executive compensation incentives on firm performance is significant in the eastern and central regions, but not in the western region. In the empirical investigation, we apply fixed effects, mediation, and moderation model specifications. To validate the reliability of our findings, we perform additional robustness checks by excluding atypical observations, employing alternative measures of the dependent variable, and adopting an instrumental variable approach. The primary results remain qualitatively unchanged under these alternative settings. Our study enriches the theoretical discourse on executive compensation and firm performance, while also delivering actionable insights for pharmaceutical firms regarding the design of incentive contracts, the alleviation of financing frictions, the adoption of regionally tailored incentive schemes, and the reduction of interregional imbalances. These findings further serve as an empirical foundation and policy reference for relevant stakeholders.
SN - 2296-2565
ER -