A Study Of Publicly Listed Firms In China On The Relationship Between Executive Pay And Firm Performance, Corporate Governance

The principal-agent theory assumes that the executive pay has incentive function. As the company's leaders and decision makers, the top executives' decisions and behavior have great impact on the company's performance, the company's future development, and the interests of shareholders. So it is very important to design a scientific and reasonable system to incentive or restrain managers, to reduce the cost of the company's agents and the agency risk. Many factors, inside and outside the company will have impact on the determination of the pay-performance incentive contracts. Some of the factors have positive effect on the increasing the effectiveness of incentive, others have negative effect on the decreasing the effectiveness. The previous literatures have carried out in-depth study on the relationship between executive pay and corporate performance, the factors that influence executive pay, the forms of executive pay. The research on the relationship between the factors of corporate governance and executive pay started relatively late. The goal of this paper is to find the relationship between the company's performance, the corporate governance and the executive pay.This paper combines theoretical analysis and empirical research, summarizes the relevant theories. And this paper takes a related data form the companies of Shanghai and Shenzhen stock market form 2007-2009 as our research sample, then uses descriptive statistics and the multiple linear regression method to study the relationship. Finally, according to the regression results, this paper puts forward the corresponding suggestion.This paper is composed of seven parts. Chapter 1 introduces the research background and significance. Chapter 2 is the literature review. The foreign research on the executive pay and company performance, ownership structure, board situation, the company operating characteristics are relatively mature. Besides, domestic scholars start relatively late. Chapter 3 is relevant theories and the vicissitude of pay system in China. Chapter 4 analyzes the factors which influence the executive pay. Chapter 5 introduces the study design of this paper, the selection of variables and the model. Chapter 6 is the empirical analysis. Chapter 7 is conclusion. The research discovery form this paper indicates:the findings of this study show a positive pay-performance relation in China when performance is measured as return on assets. The percentage of shares owned by the largest shareholders, financial risk is negative and statistically significant in the regressions. Executives share ownerships, the proportion of independent director on the board, the size of board, CEO and chairman duality, company size is positive and statistically significant in the significant.The main innovation of this paper is as follows. Firstly, this paper summarized systematically the research literature at home and abroad about the executive pay, which can be used for future research. Secondly, this paper collected the data of a-share listed companies in the last three years, which makes the conclusion of the paper more universal.