Abstract: With the relaxation of restrictions on insurance capital investments, insurance institutional investors have gradually become key players in China’s capital market. Based on the data from China’s A-share listed companies from 2008 to 2023, this study examines the impact of insurance institutional investors on manager compensation contracts. The findings indicate that in the listed companies with insurance institutional ownership, managers’ excess compensation is significantly reduced, and the sensitivity of compensation to performance is enhanced. Moreover, the constraining effect of insurance institutional investors on managers’ excess compensation is stronger in firms with higher agency costs. Further analysis reveals that there is no significant difference in the compensation governance effect of insurance institutions on the enterprises with different nature of property rights. However, compared with the state-owned insurance institutions, the compensation governance effect of the non-state-owned insurance institutions is more prominent. The above-mentioned conclusions remain robust after the robustness checks by adopting a DID model, the instrumental variable method, appointment of directors, supervisors and senior executives by insurance institutions, as well as other share holding measuring methods. The findings suggest that insurance institutions play a supervisory role in managerial compensation with the long-term attributes of the patient capital, effectively improving the efficiency of compensation contracts. Based on this, the government can establish a long-term investment incentive mechanism for insurance funds and improve the regulatory standardized system. Listed companies can improve their corporate governance structure by introducing insurance institutional investors. Investors can use insurance institutional shareholding targets as decision-making references to optimize investment choices.

Key words: insurance, institutional investors, patient capital, executive compensation