Threshold effect of executive equity incentives on corporate performance in the context of digital transformation

Executive equity incentives in practice often appear ‘over-incentivization’ and ‘under-incentivization’ problems, in the context of digital transformation, information transparency and corporate internal control environment has changed, the impact of equity incentives on corporate performance may have a critical value. Based on incentive theory, principal-agent theory and information asymmetry theory, this paper analyzes the threshold effect of different executive shareholding proportions and internal control quality in process of executive equity incentives affecting corporate performance under the background of digital transformation, selects the balanced panel data of 1,789 Chinese A-share companies in Shanghai and Shenzhen from 2017 to 2023, and conducts empirical research by using Hansen’s threshold regression model. (1) There is a single threshold effect in executive shareholding. Below the threshold, equity incentives are mainly characterized by the ‘interest convergence effect’; above the threshold, the positive promotion effect of equity incentives is weakened. (2) There is a double threshold of internal control. The higher the quality of internal control, the stronger the ‘interest convergence effect’ of equity incentives. The research results of this paper are of great significance in enriching the research on equity incentives and corporate governance.