Executive Equity Incentives and Corporate Perception of Economic Policy Uncertainty

The perception of uncertainty brought about by fluctuations in economic policy is one of the greatest challenges faced by businesses in their decision-making processes. Executive equity incentives are an effective tool for reducing corporate perception of economic policy uncertainty. Empirical results show that for every 1% increase in executive equity incentives, there is an average decrease of 3.5% in the corporate perception of economic policy uncertainty. Mechanism tests indicate that executive equity incentives can reduce corporate perception of economic policy uncertainty through two main pathways: curbing managerial myopia and enhancing the diversity of the management team. Heterogeneity tests show that the effects of executive equity incentives are more pronounced in state-owned enterprises and high-tech companies. This paper provides a new approach to reducing corporate perception of economic policy uncertainty and reveals the internal logic of how executive equity incentives affect corporate perception of economic policy uncertainty.