The Relationship Between Stickiness Of Executive Compensation And Enterprise Diversification

As a way of investment, the diversification divided participants into two kinds based on their motives, one view from a marketing standpoint is that diversification can establish an effective internal market, achieve rational resource allocation in many ways such as the cross subsidy and reciprocal exchange and so on, another view which from the perspective of agency-cost theory is that enterprise managers pursue diversification to expand the company scale,increase their control power and reputation, and they can obtain more opportunities of pecuniary compensation, Although some scholars have disputed to whether diversification mergers can increase the enterprise value, most studies of the Industry Relevance show that the value added of integration mergers is better than diversification.. When there is difference in company’s interests and their own interests, for managers, the motives to expand diversity business directly affect the implementation effect of the diversification strategy. The business owners restrain Managers’behavior with Compensation Mechanism, the design goals of compensation mechanism aim at sharing risks with owners and managers, making the two sides’interests turn out to be aligned. Once the compensation mechanism develops sticky characteristic, the manager s’salary increase higher with the company performance, while the compensation does not decrease for reduced performance. Whether this compensation mechanism able to inspire senior manager s’spirit of adventure, or make them to participate diversification which Is not associated with the current business?Behavioral modification theories of senior management become a research focus in recent years, through quantizing the degree of stickiness, the article will considers whether the stickiness of executive compensation will stimulate diversification degree of companies, and analyze the reason of the Diversified Development from the characteristics of compensation mechanism, the article aims at providing theoretical foundation and experimental evidence to some extent. This article adopts the method of empirical research, we select the executive compensation and corporate performance of public limited companies from2005to2012as samples Calculate the sensitive degree of executive compensation when the performance is getting better or falling down, their balances represent the stickiness of executive compensation, then we can get484eligible samples comply with the conditions. The dates of public limited companies in last two Years examine whether the stickiness of executive compensation from2005to2012stimulate diversification degree of companies, studying the degree of diversification and the value of the company in two years.The paper is structured as follow:The first part is the introduction, mainly introducing the theories and institutional background, putting forward the question to answer in this article, the theoretical foundation and existing research results at home and abroad were reviewed. At last this chapter put forward the research ideas and innovations of the paper.The second part is the theory analysis and research hypotheses, through systematically theory analyze we can get the motivation and performance of diversification, discuss the compensation mechanism influence on managers’ behaviors, define the concept of some important variables in the research, and propose hypothesis.The third part is the empirical research design, including the definition of variables, control variables and explanatory variables, sample selection and model design, sources of the data used.The fourth part is the empirical testing process, according to the model constructed by the third part, samples has been processed by regression analysis, thus validating hypothesis that the stickiness of executive compensation affect the degree of corporate diversification.The fifth part is the research conclusion and outlook, according to the results of theoretical analysis and empirical test, the paper summarizes the research conclusion, Rethink the weaknesses in the study, there is room to improve and further research In the future.Because our managerial labor market is still not perfect, some problems such as adverse selection and moral hazard still restrict the market efficiency. This study has significant meaning about regulating managerial labor market, promoting market development and improving the efficiency of managers market pricing.