| The stock market liberalization is an important topic of China’s economic reform,which is of great significance to stimulate the vitality of the capital market and promote further opening up.Especially under the macro background of China’s implementation of the “Belt and Road” initiative and promotion of RMB internationalization,further promoting the opening up of the capital market will help to realize the global allocation of assets and promote the long-term economic growth.Since the last century,China’s stock market liberalization reform has experienced a series of stock market liberalization policies,such as the establishment of B-share and H-share markets,cross listing,and qualified foreign institutional investor system.The formal implementation of the Shanghai Hong Kong stock market interconnection(hereinafter referred to as Shanghai-Hong Kong stock connection)in 2014 and Shenzhen-Hong Kong stock market interconnection(hereinafter referred to as Shenzhen Hong Kong stock connection)in 2016 is a milestone in China’s new round of stock market liberalization reform.It not only contributes to the convenient financing of funds between the mainland and Hong Kong,but also brings a new breakthrough for the gradual integration of the trading mechanism and regulatory system of the two places,which has a profound impact on the flow of capital elements at the macro level and decision-making behavior of firms at the micro level.To explore the economic consequences of stock market liberalization in various fields has become an important topic of current research.The executive compensation contract is the most important institutional arrangement to solve the principal-agent conflict in the modern corporate system.Exploring the impact of the stock market liberalization on the executive compensation incentive will help to explore the micro governance mechanism of the Mainland-Hong Kong Stock Connection and deepen the understanding of the corporate governance improvement effect of the stock market liberalization.Monetary compensation and equity compensation are the main components of executive compensation,which not only reflect the human capital value of executives,but also an important mechanism to alleviate the principal-agent problem between shareholders and executives.A reasonable compensation mechanism design should be able to play a positive incentive effect,stimulate the enthusiasm of executives and promote the creation of enterprise value.Unreasonable compensation contract will instead become a tool for executives to encroach on shareholders’ interests,increase agency costs,and become part of the principal-agent problem.In the monetary compensation,the executive excess compensation reflects the deviation between the static executive compensation and reasonable level,and effectiveness of the compensation incentive reflects the deviation between the dynamic executive compensation and firm performance.It is the focus of the current research on the disorder of executive monetary compensation,and also the main perspective to explore the governance of monetary compensation.With the marginal decline of the incentive effect of monetary compensation,the incompleteness of monetary compensation in encouraging executives to take risks and reducing short-sighted behaviors has become increasingly prominent.The proportion of equity compensation in executive compensation has gradually increased.To a certain extent,it has replaced monetary compensation and become an important perspective for observing the incentive intensity of executive compensation contract risk.Executive compensation structure is an important factor affecting the incentive effect of compensation,which provides an important perspective for comprehensively exploring the overall incentive effect of executive compensation contract.This dissertation selects the quasi natural experimental scenario of the implementation of the Mainland-Hong Kong Stock Connection to explore the impact of the stock market liberalization on the executive compensation contract from the perspective of the executive monetary compensation incentive and executive equity compensation incentive,andn on this basis to explore the impact of the stock market liberalization on the executive compensation structure and possible innovation effect,so as to investigate the micro impact mechanism of the Mainland-Hong Kong Stock Connection on corporate governance,It will supplement more abundant research conclusions for the research in related fields,and provide abundant evidence support for the effective implementation of the land port link policy and subsequent deep stock market liberalization.Along the research idea of "monetary compensation-equity compensationcompensation structure and innovation effect",the following seven chapters are designed to carry out the research:the first chapter is the introduction,which clarifies the research background and significance,research objectives and ideas,research framework and methods and main innovation points;The second chapter is literature review,which combs the economic consequences of stock market liberalization,the influencing factors of executive compensation,and related literature in the three fields of stock market liberalization and executive compensation,pointing out the shortcomings of existing research and places to be supplemented;The third chapter is the theoretical basis,which explains the basic contents of principal-agent theory,optimal contract theory,human capital theory and management power theory,and its role in explaining the impact of stock market liberalization on executive compensation incentive;The fourth chapter,based on the theory of management power and most contract theory,theoretically analyzes and empirically tests the impact of stock market liberalization on executive monetary compensation incentive from the perspectives of executive excess compensation and effectiveness of executive monetary compensation incentive.On this basis,it analyzes the possible impact mechanism,and considers the impact of stock market liberalization on monetary compensation growth and external information environment,and regulatory effect of management power;The fifth chapter,from the perspective of the motivation of equity incentive implementation,theoretically analyzes and empirically tests the impact of stock market liberalization on executive equity compensation incentive,explores the specific impact mechanism,and explores the impact of stock market liberalization on executive implicit compensation and total compensation;The sixth chapter combines monetary compensation and equity compensation,theoretically analyzes and empirically tests the impact of the stock market liberalization on the executive compensation structure and possible innovative effect of this impact from the perspective of the proportion of equity compensation,explores the impact of the stock market liberalization on the adjustment of the executive compensation structure,and tests the risk incentive effect of the executive compensation structure from the perspective of the risk bearing level,and examines the adjustment effect of the nature of property rights;The seventh chapter is the research conclusion and policy recommendations.It summarizes the empirical research conclusions,puts forward corresponding policy recommendations from the perspectives of the design of the firm’s executive compensation contract,the policy guidance of relevant regulatory departments and investment decision of investors,points out the research limitations,and looks forward to the future research directions.The research findings of this dissertation include:Firstly,the stock market liberalization can significantly reduce the excess compensation of executives and improve the performance sensitivity of executives’compensation.There are three paths for the governance effect of stock market liberalization on executive monetary compensation:stock price information feedback effect,improvement of accounting information quality,and strengthening of shareholders’supervision.Stock market liberalization is conducive to promoting the guiding role of stock price in executive compensation contract,promoting the improvement of accounting information quality of the target firm,and strengthening the supervision of shareholders on the target firm,so as to play a positive role in monetary compensation governance.Further analysis shows that the stock market liberalization can help to restrain the excessive growth of executive compensation,especially the salary growth of firms with high salary levels,which shows that the stock market liberalization can indeed help to suppress the problem of sky high salary and promote the return of salary to a reasonable level.The stock market liberalization will significantly improve the external information environment of the firm,which is shown by the increase in the attention of media reports and analysts.It shows that the stock market liberalization can not only promote the internal self-discipline of the firm and improve the quality of accounting information,but also improve the information disclosure pressure faced by the firm through external self-discipline and reduce the space for executive compensation manipulation.However,the positive governance effect of stock market liberalization on executive excess compensation will be limited by the power of managers,which shows that as an external governance mechanism,the governance effect of stock market liberalization depends on a certain internal governance environment.Only with the cooperation of internal governance mechanism can the stock market liberalization play the expected governance effect.Secondly,the stock market liberalization can promote the choice of equity compensation and significantly improve the intensity of equity compensation of senior executives.Further analysis shows that the promotion effect of stock market liberalization on executive equity compensation conforms to the principal-agent motivation and human capital motivation,indicating that Mainland-Hong Kong Stock Connection firm will improve the equity incentive intensity for the purpose of alleviating the agency conflict between executives and shareholders and retaining executives.In addition to explicit compensation such as monetary compensation and equity compensation,the stock market liberalization can significantly reduce the implicit compensation of senior executives,but it has no significant impact on the total compensation of senior executives.This shows that the stock market liberalization can change the compensation structure of senior executives by influencing the trade-off and selection of monetary compensation and equity compensation without significantly affecting the total compensation of senior executives.Thirdly,the stock market liberalization can significantly promote the adjustment of the executive compensation structure and increase the proportion of equity compensation in the executive compensation,and this promotion will further enhance the risk-taking enthusiasm of executives and promote enterprise innovation.Further analysis shows that the impact of the stock market liberalization on the remuneration structure of senior executives is mainly reflected in the active adjustment of the firm granting more equity to senior executives,rather than the passive adjustment of the remuneration structure of senior executives,which indicates that the change of the remuneration of senior executives under the stock market liberalization belongs to the active action.The impact of the stock market liberalization on the executive compensation structure will promote the rise of the overall risk-taking level of firms,and further verify the risk incentive effect of the adjustment of the executive compensation structure under the stock market liberalization.The state-owned property rights will reduce the promotion effect of executive compensation structure on enterprise innovation,which shows that the strict compensation control and excessive risk aversion enterprise environment not only inhibit the innovation enthusiasm of executives,but also reduce the promotion effect of executive compensation incentive on enterprise innovation.Possible innovations in this dissertation include:Firstly,from the perspective of external governance environment and foreign investors,it explores the influencing factors of executive compensation contract and expands the research of executive compensation contract.The existing literature mainly focuses on the determinants of executive compensation contract from the perspective of management and internal governance mechanism.The research on external governance mechanism only focuses on factors such as manager market competition,government intervention,creditor constraints and media reports,and rarely focuses on the impact of changes in the external governance environment of the firm.The stock market liberalization is an important measure of China’s financial market reform,and also an important measure to improve and optimize the corporate governance mechanism.This dissertation takes Mainland-Hong Kong Stock Connection as a quasi natural experiment,and provides new empirical evidence of the external governance environment and influence of foreign investors on corporate governance from the perspective of executive compensation contract.It complements the research literature on executive compensation contract,which can be used for reference for subsequent related research.Secondly,the paper examines the governance effect and impact path of the stock market liberalization on the executive compensation contract from multiple perspectives,enriching the relevant literature on the economic consequences of the stock market liberalization.As for the economic consequences of the stock market liberalization,the existing research mainly focuses on the economic consequences at the macro level,while the research on the microeconomic consequences focuses on the firm’s investment and financing decisions,cash holding decisions,dividend policies and information disclosure behaviors.The research on the executive compensation contract is relatively small,and most of it focuses on the field of monetary compensation and implicit compensation.There is a lack of more systematic research on the executive compensation.Compared with the previous literature,this dissertation first explores the governance effect of stock market liberalization on executive monetary compensation incentive from the perspectives of executive excess compensation and compensation effectiveness based on the two kinds of compensation chaos,namely,the deviation between static compensation level and reasonable level and deviation between dynamic compensation change and corporate performance.At the same time,combined with the design characteristics of the trading system of the land port link and governance mode of the foreign investors introduced,this dissertation analyzes the impact path of the stock market liberalization on the monetary compensation incentive of the executives from three perspectives:the feedback effect of stock price information,the quality of accounting information and supervision of shareholders.Then,from the perspective of the proportion of senior executives’shareholding,this dissertation explores the impact of stock market liberalization on the equity compensation incentive of senior executives,and explores its impact mechanism in combination with the implementation motivation of equity incentive.Finally,from the perspective of the proportion of equity compensation,this dissertation examines the impact of stock market liberalization on executive compensation structure,and selects enterprise innovation as the observation object of enterprise risk decision-making to explore the risk incentive effect of executive compensation structure adjustment under the condition of stock market liberalization.Compared with the existing research,the research on executive compensation incentive in this dissertation is more complete and systematic,including the most important monetary compensation and equity compensation in the formal compensation contract.It is not limited to the selection of a single compensation method,but more extended to the study of compensation structure,which adds new research evidence to enrich the research in the field of executive compensation contract,and is conducive to deepening the understanding of the micro governance effect of China’s stock market liberalization.Thirdly,the macro capital market changes and micro compensation system will be linked,and put into a unified corporate governance research framework to provide new empirical basis and policy inspiration for the implementation of the land port link policy.The existing literature on stock market liberalization mainly focuses on the QFII system and cross listing system which were implemented earlier.The land port link policy opened in 2014 and 2016 is a major measure of China’s stock market liberalization to the outside world.The test and analysis of its implementation effect is of great significance to China’s future financial market reform.Up to now,there has not been a systematic study on the policy effect from the perspective of executive compensation contract.This dissertation links the macro capital market changes with the micro compensation system,explores the impact of the open policy of the land port link on the corporate governance mechanism,and tests the policy effect of the land port link from the perspective of corporate governance,which is helpful to provide rich evidence support for the effective implementation of the land port link policy and subsequent deep stock market liberalization,and has certain policy reference value. |
