Managerial Compensation And Corporate Performance

Recently, the process of privatization is accelerating in China's capital market. Share-trading reform has generally completed. More and more private enterprises become listed companies. The stocks of modern companies are widely scattered. It separates ownership from control, and leaves the power of control to the managers. Agency cost becomes a big problem. How to design an effective compensation system in order to align the interests of self-interested mangers and those of shareholders becomes an issue for the development of the company. Managerial compensation and incentive in modern enterprises turn out to be widely concerned.This dissertation focused on the managerial compensation in China's listed companies, and the impact of corporate performance on managerial compensation. It began with an overview of related literatures. In this part, the basic theory on managerial compensation - principal-agency theory - was outlined. It also introduced the researches about the relationship between managerial compensation and corporate performance both home and abroad, and compared them. Then it analysed the current situation of managerial compensation. In this part, it recalled the reform of managerial motivation in China, and took a close look on annual salary and plan of stock incentive. It also analysed cash incomes and stock-based incomes in China's listed compamies, which set up a foundation for further analyses. The main part of the dissertation studied the impact of corporate performance on managerial compensation. The empirical research showed that the managerial motivation has dramatically improved nowadays. The relationship between corporate performance and managerial compensation are positive in the past few years.I tried my best to achieve innovations in theorial and empirical researches. When analyzing the current situation of managerial compensation, I focused on the new development in the plan of stock incentive, and particularly analysed the listed companies which had completed or started the plan. When analyzing the impact of corporate performance on managerial compensation, I made use of data from 2001 to 2005, and found out that the influence of corporate performance on managerial compensation was growing on in the those years. While many researchers before used cross-section data only, my study showed how the effect of corporate performance on managiral compensation changed along the time. Besides, I used stock index as a proxy for corporate performance, not only EPS and (or) ROE which other researchers used. It gave insight on how change of shareholder's fouture would affect managerial compensation. I also studied the impact of type of controller on compensation. The result showed that the relationship between corporate performance and managerial compensation in private enterprises wasn't stranger than other enterprises.