Senior Executive Pay and Corporate Sustainability Performance: The Roles of Green Innovation, Governance and State Ownership in China

This study examines the association between senior executive pay and corporate sustainability performance using 14,524 firm‐year observations of Chinese A‐share listed firms over the period 2019–2023. This period provides consistent data availability and encompasses China's transition towards the 2020 dual‐carbon policy. Drawing on agency, managerial power, stakeholder and resource dependence theories, we investigate nonlinear effects, green innovation as a mediating mechanism, and governance and ownership as boundary conditions. We find that senior executive pay is positively associated with sustainability performance, although this association weakens at higher levels of pay. Green innovation partially mediates this relationship, while gender composition, managerial age, overseas experience and board independence condition its strength. The positive association is stronger among state‐owned enterprises, particularly after 2020. These findings remain robust to alternative measures of executive pay, lagged specifications, additional governance controls, propensity score matching and entropy balancing. Overall, the findings suggest that compensation design should account for sustainability objectives, compensation levels, governance characteristics and the broader institutional context.