This study examines how executive incentive structures align with the temporal and motivational demands of corporate digital transformation (DT), focusing on cash compensation, equity-based incentive exposure, and internal pay dispersion.
Using panel data from 3,583 Chinese A-share listed firms from 2011 to 2023 (37,274 firm-year observations), we measure DT with a text-based annual-report index and estimate fixed-effects models supplemented by robustness, temporal, and endogeneity analyses.
Equity-based incentive exposure and internal pay dispersion are positively associated with DT, whereas the association between cash compensation and broad DT is weaker and more specification-sensitive. Internal pay dispersion exhibits an inverted U-shaped relationship with DT, suggesting that moderate tournament incentives may mobilize managerial effort, while excessive dispersion may weaken coordination. Complementary analyses show that cash compensation is positively associated with more immediate technology-oriented resource commitments.
Boards should match incentive structures to strategic time horizons. Cash rewards may support near-term resource mobilization, equity-based exposure is better aligned with delayed value creation, and pay dispersion should be calibrated to preserve motivation without undermining collaboration.
This study advances an incentive–strategy fit perspective by showing that executive incentives differ in temporal horizon and motivational mechanism. Equity-based exposure addresses temporal misalignment, while internal pay dispersion mobilizes effort and change subject to coordination costs.
