Research On Influence Of Performance Volatility And Collusion Tunneling On Executive Implicit Compensation And Its Economic Effect

With the increasing complexity of the company's economic activities,the forms of compensation contracts to maintain the efficiency of executives are gradually diversified,with explicit contracts as the main form,and a certain degree of implicit contracts as a supplement.The implicit compensation of executives is the remuneration or profit besides the explicit monetary compensation,and perks is its main manifestation.For a long time,the high level of executives perks in Listed Companies of China has attracted widespread attention from all circles.The theoretical circles focus the research on the performance of the "agency view" and "efficiency view" of executives'implicit compensation.The "agency view" holds that implicit compensation is the main cause of corruption and agency costs,and it is also the manifestation of the expropriation of company resources by executives;while the "efficiency view" holds that implicit compensation can be used as an alternative incentive in the case of insufficient explicit compensation incentives for executives.Whether implicit compensation is a compensatory incentive or an agent problem depends on which economic component holds the dominant position in a particular economic activity or business environment.However,the existing research on the influencing factors of implicit compensation's economic effect is very limited.Under the special background of China's economic policy system,listed companies have two kinds of principal-agent problems:one is the agency problem between shareholders and executives(the first kind of agency problem),the other is the agency problem between large shareholders and small shareholders(the second kind of agency problem).Under the dual principal-agent framework,the company's operating environment and managers' specific behavior may have an impact on the implicit compensation and its economic effects,but the impact mechanism has not been clear.Firstly,performance volatility brings risks to the economic interests of shareholders and executives,and aggravates the first kind of agency conflict.Performance volatility reflects the company's operational risk,which brings greater uncertainty to the explicit returns of executives.The executives may seek excessive implicit returns through self-interest behaviour to make up for the explicit losses.Under the risk environment,in order to reduce agency costs,shareholders' will increase the intensity of internal supervision and restrain executives from seeking excessive implicit compensation through self-interest behavior.Secondly,the tunneling behavior of major shareholders highlights the second kind of agency problem of the company.Collusive tunneling is a typical self-interest behavior of managers,which aggravates the interests conflict between large shareholders and small shareholders.Because of its strong concealment and low transaction cost features,implicit compensation is often used to share the tunneling earnings by large shareholders.Based on the perspective of dual principal-agent to analyse the above problems,it is found that both the motive of large shareholders' implicit compensation payment and the motive of executives' implicit compensation acquisition may have changed,which leads to changes in the economic composition and structure of executives' implicit compensation.Performance volatility and collusion tunneling may have an impact on the implicit compensation and its economic effects,and there may also has interaction between them.The research of this aspect is very weak and needs to be explored in depth.Taking the executives' implicit compensation of Chinese listed companies as the objects of the research and based on the dual principal-agent perspective,this paper studies the impact of performance volatility and collusion tunneling on the executives'implicit compensation and its economic effects,as well as the interaction between them.Firstly,on the basis of the classical principal-agent model,this paper introduces the key factors such as performance risk and tunneling degree to rebuilds the multi-task and multi-party principal-agent models,which theoretically explains the impact of performance risk and collusive tunneling behavior on implicit compensation and its economic effects.Secondly,based on the data of 879 A-share listed companies in China from 2012 to 2017,this paper validates the above effects through empirical research,and explores the moderating effect of the characteristics of executives' dependence on large shareholders and the nature of property rights on the above relationships.The main works and the main conclusions of this paper are as follows:(1)To examine the impact of performance volatility on executives' implicit compensation and its economic effects,the study found that:?Performance volatility significantly reduces the level of executive implicit compensation,especially in non-state-owned companies;?Performance volatility promotes the positive economic effect of executive implicit compensation,especially in state-owned companies;?The stronger the independence of executives,the more significant the negative impact of performance volatility on the executives' implicit compensation,and the more obvious the positive economic effect of implicit compensation.(2)Testing the impact of collusion tunneling on implicit compensation and its economic effects,the study found that:? Collusive tunneling promotes the increase of executives' implicit compensation,and weakens the positive economic effect of implicit compensation,especially in state-owned companies;?The stronger the independence of executives,the more prominent the promotion effect of collusion tunneling on the increase of implicit compensation,and the more obvious the negative impact on the positive economic effect of implicit compensation.(3)To examine the interaction of performance volatility and collusion tunneling on executive implicit compensation and its economic effects,the study finds that:?Performance volatility and collusive tunneling have an interactive effect on the implicit compensation and its economic effects.Collusive tunneling weakens the negative correlation between performance volatility and implicit compensation,and promotes the "agency view" of implicit compensation.Performance volatility promotes the positive correlation between collusive tunneling and implicit compensation,and collusive tunneling promotes the negative correlation between collusive tunneling and implicit compensation.The above conclusions are more significant in the sample of non-state-owned companies.?The stronger the independence of executives,the more significant the interaction between performance volatility and collusion tunneling on the level of implicit compensation and its economic effects.The main academic contributions of this paper are reflected in the following four aspects:(1)Based on the dual principal-agent perspective to studies the influencing factors of executive implicit compensation and its economic effects,which opened up a new way for theoretical exploration.(2)Starting from the company's operating environment and managers' specific behavior,this paper explored the impact of performance volatility and collusion tunneling on executive implicit compensation and its economic effects,as well as the interaction between them,which has broadens the research horizon and enriches the existing research results.(3)Based on the classical principal-agent model,the principal-agent models with performance risk,collusion tunneling degree and recessive compensation factors were reconstructed.Theoretically interpreted the mechanism of the influence of performance volatility and collusion tunneling on implicit compensation and its economic effect,which provided theoretical support for the follow-up study.(4)Breaking through the research framework of executive homogeneity,introducing heterogeneous factors of executives to explore the different impact of the dependence relationship between executives and large shareholders on the above issues,which made the research conclusions more accord with the reality of China.The conclusion of this study can provide useful reference for the practice of executive implicit compensation incentive in China,as well as evidence support for corporate governance in listed companies.