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An Research On The Relationship Between Executive Compensation, Interaction Effect And Bank Performance,which Based On The Perspective Of Internal Point

Posted on:2017-02-11Degree:MasterType:Thesis
Country:ChinaCandidate:C H XiaFull Text:PDF
GTID:2309330482473139Subject:Finance
Abstract/Summary:PDF Full Text Request
Recent years, compensation of high-level executives in banks is soaring while poor performance of their banks are common phenomenon. That makes agency conflict between shareholders and managers even worse. This phenomenon causes public and regulatory authorities’ attention. In February 2009, the Ministry of Finance issued <Compensation management approach of state-owned and state holding financial enterprises(draft)>, which shows that the pre-tax maximum compensation of state-owned financial enterprises is 2.8 million yuan annually. In 2010, the China Banking Regulatory Commission issued <The guidelines of commercial bank salary regulatory>, which establishes and improves the scientific and effective corporate governance mechanism, promotes stable operation and sustainable development of banking industry. The Guidelines mainly focused on salary structure, compensation management and salary regulation standard.Salary system in China’s banking industry has gradually under the corporate governance and proved some kind success. But is that executive compensation incentive really works? Monetary compensation incentive and equity incentives which way is more effective?As the hot topic of corporate governance, the relationship between executive compensation and performance has cost many scholars attention but still fail to reach an agreement. Except different samples, but also has endogenous problems.This paper takes 16 commercial banks from 2005 to 2014 as sample to research the dynamic relationship between executive salary and bank performance. Which is under the framework of dynamic endogenous, using dynamic panel system GMM estimation method, considering the executive compensation interact with other governance mechanism.The followings are main results of this paper: First, executive salary and bank performance are positively related. Second, early period performance of bank has feedback effect to executive compensation, but not that obvious. Third, the interaction between executive compensation and other governance mechanisms has an impact on bank performance.This paper summarized main articles and theories about the relationship between executive salary and bank performance and empirical research of bank dynamic endogenous performance, in order to explain components of executive compensation, bank dynamic endogenous performance and clarify the interaction and effect mechanism between executive salary and bank performance. This is meaningful for perfection executive salary system in commercial bank.The practical significance: firstly, this paper select 14 indicators which are return on assets, return on equity, cost income ratio, earnings per share, non-performing loan ratio, capital adequacy ratio, core capital adequacy ratio, set aside to prepare rate, liquidity ratio, LDR, loan structure, asset growth rate, revenue growth rate, profit growth rate form profitability, safety, liquidity, growth aspects among banking performance. With these data, I use principal component analysis which provides reference value at construction of performance evaluation system of commercial Banks and quantitative research of performance.Secondly, in this paper, under the perspective of dynamic endogeneity, build executive compensation, interaction effect and bank inter-temporal interaction model; coordinate interaction between executive pay and bank performance and time lag; establish dynamic panel data model of executive compensation, interaction effect and bank performance; apply GMM estimation method. Which expands existing research angle, enriches existing research methods and provides more research results.
Keywords/Search Tags:executive salary, dynamic endogeneity, GMM
PDF Full Text Request
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