Study On Managers’ Compensation-incentive Mechanism Of Listed Financial Institutions

At present, it has become a hot topic that whether the compensation mechanism of managers in listed financial institutions is reasonable and effective, as well as whether managers’ enthusiasm can be motivated to the greatest degree. A scientific, rational and effective compensation-incentive mechanism can not only enhance business performance as a result of the improved endeavor of managers for the enterprises’ development goals, but also promote the entire financial industry, even the entire national economy to develop in a healthy and sustainable way. Therefore, it is of great theoretical and practical value to study the compensation-incentive mechanism of listed financial institutions in China from the perspective of demonstration.This paper firstly reviews the research results both abroad and domestically; and summarizes the compensation-incentive theory. Through the comparison study of successful model of compensation-incentive in foreign financial institutions, some inspirations are grabbed for constructing and improving the managers’ compensation-incentive mechanism of financial institutions in China. Afterwards, based on the summary of panel-data model theory, a hypothesis and empirical model is set up for the study. With the collected panel data from37listed financial institutions in China, an estimated study is conducted on managers’ compensation-incentive mechanism by applying the fixed effect model. The conclusions are drawn as follows:firstly, the managers’ compensation-incentive mechanism of listed financial institutions in China only exists in simple forms, lacking of attention to those compensation incentives which focus more on the long-term effects, such as stock options and restricted shares, etc. Secondly, the managers’ compensation is basically connected to the business performance, but not closely related. Thirdly, there is little power of the board of directors and board of supervisors on managers’compensation. Besides, due to the independent directors take only a small proportion and lack supervision measures, the management efficiency and governance mechanisms need to be improved. Fourthly, for China’s financial institutions, especially banks, the "dominant" state-owned share weakens the efficiency of supervision; the problem of the absence of the owner has come into focus. Therefore, the financial supervision, especially the supervision on managers’ compensation is required to be strengthened. In the last section of this paper, some according recommendations for solving the existing problems in the present compensation-incentive mechanism of financial institutions are proposed.