The Empirical Analysis On Affecting Factors Of Listed Company Executives Monetary Compensation Incentive

The fundamental cause of the principal-agent problem in modern enterprise system is the separation between enterprise ownership and management rights, and the fundamental problem of the principal-agent theory is the relationship between executive compensation and performance. Agency theory is that the executive incentive can effectively solve the principal-agent problems between shareholders and executives. As the owners of the shareholders in an enterprise, its goal is to pursue the enterprise value and shareholder wealth maximization; while the senior management personnel of agency operators (hereinafter abbreviate as the "executive"), in addition to operating according to the wishes of shareholders of the company management, is the pursuit of higher payment and maximization of individual utility. Objective function of the difference between both determines their decisions and behaviors in business activities are inconsistent. What factors will influence the executive compensation incentive? And whether the results of the executive compensation incentive indeed reduce the agency cost or not? On the basis of related literatures, combined with the transformation of China economic system background and the actual situation of listed companies, the article attempts to do empirical analysis of its effects on executive pay by the corporate performance, executive management power and government regulations, and then do the empirical analysis of executive compensation for the influence of agency cost. This paper chooses Shanghai and Shenzhen two cities’A-shares listed company’s internal governance and financial data as the research sample from2007to2012, from the effective contract theory and principal-agent theory, utilizes the Statistics and Economics related tools and methods, research the current situation of the listed company executive compensation incentive and the possible problems, provides the practical experience and reliable suggestions for the designment and improvement of China listed company executive compensation incentive mechanism.The whole paper is divided into6parts, the main content and logical structure is as follows:The first part is the introduction. From the present conditions of executive compensation incentive of listed company, put forward the significance of the salary incentive research, define the purpose of the premise and the related concept, exposit the paper research methods and content. The second part is literature review. Expounding the main point and research achievements of the literature from the aspects such as corporate performance, management power and government regulation of executive compensation incentive at home and abroad respectively; then comment on the main point of the research literature and research results of the executive compensation incentive and the agency cost.The third part is the research design and model building. In the existing literature on the basis of research results, put forward the research hypothesis in this paper and define the research variables, using the ordinary least squares (OLS) to construct the empirical model about the executive compensation influence factors and its impact on the agency cost.The fourth part is the empirical result analysis. Firstly analysis the status of executive compensation incentive of listed companies in our country, then use the empirical model to estimate the parameters, and get relevant regression results, finally test robustness of the model and reliability of the result.The fifth part is the countermeasures and suggestions. According to the empirical conclusions, put forward the targeted countermeasures and suggestions; provide certain reference for our country listed company executive compensation incentive mechanism design and perfection.The sixth part is conclusion. This part summarized the main ideas of the paper, and point out the limitation of the study and the future research direction.By analysis the present executive compensation incentive of listed companies in our country, we found that executive compensation incentive of listed companies in our country exist the following features:(1) Different industries exist the significant difference.(2)The individual executive payment has a big difference.(3) The executives hold fewer shares and have a significant difference among industries.From the empirical results through analysis the corporate performance have impact on executive compensation, we found that:(1) the executive compensation of listed companies has the positive correlation with the return and the recovery rate of assets in cash of current and the previous year, it suggests that the company performance indicators was a positive impact on executive pay based on the accounting rate of return, also means that executives still hope to improve the corporate perfocrmance in order to get high salary reward.(2)The executive compensation has not significant difference with the negative relationship of the previous year stock returns.(3)The listed company executive compensation has a significantly positive relationship with the company size, that is the bigger scale of listed company, the company executives are in control of more resources, and get more easier to achieve higher corporate performance, so as to obtain a high salary reward;(4)the executive compensation and the asset-liability ratio is significantly negative correlation, that adopted by the listed company financial leverage is higher, the greater risk in the management of the firm, and as a senior manager get the less residual rights and interests of the shareholders’claims, so relatively obtain the few compensation in return.From the empirical results through analysis the management power impact on executive compensation, we found that:(1) Executives that hold more shares proportion, from the self-interest, he will take more actions for himself when make the important decisions in the company, it led to the executives shareholding have a positive correlation on executive compensation.(2) The general manager who is in the longer term, he gets the "Payment term" remuneration increase will lead to increase its annual remuneration.(3) The chairman, concurrently general manager will lead to rising executive pay, so the increase of executive power will lead to using its authority to seek higher wages for themselves and additional invisible consumption.(4) The independence of the board of directors will have an effective supervision on the executive behavior, the director system inhibit the management power to a certain extent and the emergence of abnormal to limit executive pay.(5) The actual compensation and excessive remuneration have significant negative correlation relationship with equity balance degree. Besides, it proves that the management power increases have a big effect on getting high compensation at the same time.Based on empirical results from the government regulation have impact on executive compensation, we found that:(1) The executives which owned by the state holding listed company, when using the management power to influence their pay, meanwhile interposed by the government’s administrative regulation and policy.(2) The non-state-owned listed companies’executives will use their power to manipulate their own compensation levels in more space, and could have a larger impact on their own salary system.Based on the empirical result from the executive has influence on the agent costs, we found that:(1) The management fee and the actual compensation and over compensation is significantly positively related to, and has significant negative correlation with the return on equity, company scale and asset-liability ratio.(2) The asset turnover and the actual compensation and excess compensation has negative correlation, has significantly positive correlation with return on equity and company scale, and has negative correlation with the asset-liability ratio. According to the compensation level grouping test also obtained the consistent conclusion:our country listed company executive compensation incentive have not achieve the desired effect which reduce agency costs, instead, the rising executive pay increase the agency cost. It could be the results of executives make use of the management power rent-seeking. If the executives can affect their high salary, when get the high compensation, they will not be committed to reduce the agency cost of the company.