Research On Executive Compensation’s Impacton Financial Performance

With the implementation of China’s reform and opening up and economic system reform policy, private enterprises have become an important force in promoting China’s economic, more and more private enterprises have also started the implementation of marketing strategy and to be listing corporations, accelerating the development of the stock market. But in the face of the fast changing business environment, it is necessary, for private enterprises, to make full use of talents, especially the Senior management personnel, to maintain their competitiveness. But the incentive mechanism for private listing Corporation executives is still not well enough. It is necessary to solve the problem to effectively motivate executives, to maximize the interests between managers and corporation owners. This paper, studied the relationship) between the financial performances of private listing companies and executive incentive monetary compensation, compensation gap, shareholding and perquisites consumption from the perspective of the different ways of privatization in China, to explore the effects of different executive incentive ways, and finally to provide some suggestions to perfect our private listing Corporation executives incentive mechanism. The empirical research results show that:(1) As to the general managers, monetary compensation incentive had a significant positive impact on the company’s financial performance, and there was a stronger positive effect in the privatized state-owned enterprises than the direct created private companies;(2) The compensation gap between the general manager and the executive team members has a significant positive impact on corporate financial performance, and there was a stronger positive effect in the privatized state-owned enterprises than the direct created private companies. However, jointing action with other incentives, the effect will change, so you can appropriately increase the gap, but it should not be too large;(3) The shareholding ratio of the general manager had not a significant positive impact on the company’s financial performance. One possible reason was that general managers in private companies have low ratio of shares or even zero. Equity incentive mechanism has not been widely used. Another possible reason is that the equity incentive of the general manager is very difficult to significantly improve the company’s overall performance;(4) The company’s financial performance is significantly related to the level of consumption of the executive and senior management team. The consumption is more of a kind of incentive, which could also play a very strong incentive. There was also a stronger positive effect in the privatized state-owned enterprises than the direct created private companies.Finally, according to the conclusion, we put forward some relevant policy suggestions...