An Empirical Study On Managerial Power And Executive Compensation Stickiness

The optimal contract theory believe that executive compensation contracts should be an increasing function of company performance, but researches show that domestic listed companies exist the phenomenon of "Sky- high executive compensation" and "rich abbot poor temple" come and go, especially state-owned listed companies. The performance of listed companies is declining or even in a loss, while executive compensation continues to rise sharply, which is executive compensation stickiness. Data shows form 2001 to 2013 finance executive compensation is the highest in all industries. But is this match with business performance, or if executives compensation stickiness exist in financial sector during the financial crisis. Some researches show that managerial-power enterprises have greater stickiness than non- managerial power enterprise, and is this can also apply to financial companies? Is that having the same effects on state-owned enterprises and the non-state-owned enterprises? Based on the principal component analysis(PCA), using six indicator to synthesis managerial power variables. In this paper, we combined theoretical analysis and empirical research to study. The empirical results found that: First, executive compensation stickiness also exists in C hina’s financial sector, namely the degree of decreasing compensation with the declining performance was significantly less than rises with the inc rease of compensation. Second, managerial power has a positive correlation with the degree of compensation stickiness. Third, comparing the relationship of managerial power and compensation stickiness under different property rights, we conclude that state-owned financial enterprise managerial power has a more significant positive correlation that non-state enterprise. Finally, the empirical results of this paper is mainly from the perspective of internal corporate governance, to restrict the managerial power as a breakthrough point, put forward some policy suggestions to solve the problem of executive compensation stickiness, and put forward some prospects for the lack of empirical research of this paper.