Analysis On Executive Compensation Incentive’ Impact On Minority Investor Protection In State-owned Listed Companies

Since the reform of non-tradable shares started in 2005, great changes of the ownership structure have taken place in Chinese listed companies. people concerned more about the relationship between large shareholders and management. A large number of studies show that compensation incentive wouldn’t solve the principal-agent problem necessarily. Company executives may set salary levels themselves to violate the interests of minority investors. Drawing on the absorption of domestic and foreign research results, the paper base on the point of view in interests protection of minority shareholders and the principal-agent and incentive contract theory, then analyze the conflict between senior management and small investors. Using the relevant data from 2007 to 2009 of state-owned listed company, this paper defines variable such as implicit and explicit incentive salary and Long-term and short-term incentive salary, and selects company size and counter-balance towards the largest shareholder as control variables. Then we test the relationship between the executive compensation and interests of minority investors in different incentives by using the empirical research methods, and try to find suitable compensation incentives to protect minority investors.The result of the empirical research demonstrates that: the more cash compensation and non-pecuniary compensation of executive in state-owned listed company, there are the higher possibility of occupying the interests of minority shareholders. Due to low share-holding rate of senior management, the interests between executives and shareholders can not be the same so as to protect minority investors effectively. Effects by company size making on the protection of minority investors are complex. It means the larger firm size is, the more accrual profits manipulated by management exist .Otherwise executive may choose to pay dividends to attract the public. The relationship between the second to the fifth largest proportion of share-holding and interests of minority investors didn’t not reach our expectations. The existence of one share dominates exclusively is still led to the looting of minority shareholders. Finally, combining analysis with conclusions mentioned above, we take several countermeasures about minority investor protection so as to protect investors better.