A Study On The Impact Of Cross Listing On Executive Compensation Incentive

With the development of the global capital market,since the 80s of last century,cross listing has become a bright spot in the international capital market and a hot spot in the field of finance research.It has been carried out a lot of discussions on the governance mechanism of cross listing and has been made some progress in the existing research,such as the quality of accounting information,the replacement of CEO,the structure of the board of directors,the ownership structure and so on.However,the micro mechanism of the cross listing to improve corporate governance is not clear,especially the cross listing on the executive compensation incentives of the company,which is the most important institutional arrangement to alleviate the conflict of principal agency conflicts,has not yet attracted enough attention.Based on the above thinking,this paper tries to build a theoretical analysis framework based on the perspective of dual internal and external governance,and discusses the mechanism of the effectiveness and fairness of cross listing on executive compensation incentive.By comparing and analyzing the data of H+A shares,A+H shares and A shares in 2008-2017,the mechanism of the action is tested by using the panel data model,the tendency score matching(PSM)method,Difference-in-Difference method(DID)and the Heckman two stage model.The research conclusions can provide Chinese experience with the existing theoretical hypothesis and further enrich the relevant literature on the effect of cross listing governance.In practice,it can also provide valuable reference for the improvement of the executive compensation incentive system of the cross listed companies in China.The main conclusions of this paper are as follows:First,the mechanism of cross listing on executive compensation incentive should be systematically explored within the framework of corporate governance.This is because the cross listing can bring about the improvement of the external governance mechanism,strengthen the information disclosure and protect the interests of the investors,and then promote the fairness of the executive compensation incentive.On the other hand,the cross listing has led to the adaptation and improvement of the corporate governance structure and internal governance mechanism to the laws and regulations of the international securities market,and established of a more perfect and effective incentive and built restraint mechanism to mitigate the conflict of interests between the shareholders and the management,and formed an effective restriction on management and executive power.Those can ensure the effectiveness of executive compensation incentive system.Second,cross listing enterprises improve the effective balance of executive power through internal governance mechanisms,thereby promoting the effectiveness of executive compensation incentive.From the perspective of internal governance,"cross listing-executive power-executive compensation incentive effectiveness" is the main path of cross listing on executive compensation motivation.Cross listing can not only directly improve the effectiveness of executive compensation incentives,but also effectively alleviate the adverse effects of executive centralization on the effectiveness of executive compensation incentive.The test results based on the sample data of the HA share cross listed companies and the matched pure A share companies support the theoretical hypothesis.Third,cross listed companies improve the regulatory quality of information disclosure and the degree of investor supervision through the external governance mechanism,and then promote the fairness of executive compensation incentive.From the perspective of external governance,"cross listing-information disclosure regulatory quality/investor supervision-executive compensation incentive equity" is the main impact path of cross listing on executive compensation incentive.The test results based on the sample data of the HA share cross listed companies and the matched pure A share companies support the above theoretical hypothesis.The innovation of this article is mainly reflected in the following:First,it puts forward a theoretical analysis framework of cross listing governance mechanism based on both internal and external perspectives.Although there is a lack of direct empirical research on the relationship between cross listing and executive compensation incentive,the current research has shown a clearer theoretical connection of "cross listing-Corporate Governance_executive compensation incentives".Therefore,based on the dual perspective of internal and external governance,this paper constructs the theoretical analysis framework of cross listing governance mechanism,and reveals two basic cross listing governance effects "cross listing-internal governance improvement-executive compensation incentive" and"cross listing-external governance optimization-executive compensation incentive equity".The framework provides a feasible analysis idea and a new theoretical explanation for solving the problem of the relationship between cross listing and executive compensation incentive effect.Second,it reveals the influence mechanism of cross listing on the effectiveness of executive compensation incentive from the perspective of internal governance.The effectiveness of executive compensation incentive will be affected by the internal power allocation of the company.Once the misconfiguration of the right configuration leads to high executive control,it may not form an effective internal balance to the executives,threatening the effectiveness of executive compensation incentive.This paper argues that cross listed companies can improve the effective balance of executive power through internal governance mechanisms,thereby promoting the effectiveness of executive compensation incentives.From the perspective of internal governance,"cross listing-executive power-executive compensation incentive effectiveness" is the main impact path of cross listing on executive compensation incentive.Cross listing can not only directly improve the effectiveness of executive compensation incentive,but also effectively alleviate the adverse effect of executive centralization on the effectiveness of executive compensation incentive.Third,it verifies the influence mechanism of cross listing on the fairness of executive compensation incentive from the perspective of external governance.For China,which is in the transition period of the economy and system,it is the need for the harmonious development of the society to give consideration to the compensation incentive of the company executives,and also the realistic choice to guarantee the incentive effect.Both realistic and theoretical studies show that the improvement of the quality of information disclosure and the degree of investor supervision can reduce the level of the executive’s unreasonable salary,promoting the fairness of executive compensation incentive.Based on the existing research,this paper believes that the cross listed companies can improve the quality of information disclosure and the degree of investor supervision through the external governance mechanism,and then promote the fairness of executive compensation incentive.That is,cross listing can not only improve the fairness of executive compensation incentive by improving the quality of information disclosure,but also can enhance the supervision of investors by improving the media attention,and then promote the fairness of executive compensation incentive.