Empirical Research Of Equity Incentive,Executive Pay And Corporate Performance

Executive compensation incentives (monetary incentive and equity-based incentives) has always been an important issue of corporate governance, and the relativity of executive remuneration and company achievement has been a hot area of financial research. Reasonable pay incentives can effectively stimulate the enthusiasm of executives, and encourage them to improve work efficiency, so that the interests of the agent and the principal tend to be uniform, which can reduce agency costs and asymmetric information risk and improve the company’s operating performance. Since 2008, after the country experienced a split share structure reform and financial crisis baptism, changes in the macroeconomic environment make the listed companies managers face significant opportunities and challenges in their work, in addition to the deepening of the reform of the equity division in the enterprise’s internal ownership—the application scope of the equity incentive is becoming to expand, which provide a good opportunity for our study of executive pay and corporate performance relationship.Based on this background, this paper tries to explore whether the listed company executives currency and equity incentive compensation incentive is able to promote the company’s performance improvement by combining normative analysis and empirical analysis of ways, and at this stage which incentives can enhance the performance of the company more efficient and provide some ideas and methods for the listed companies corporate governance. The theoretical basis of this study is mainly based on the classical principal-agent theory and management incentive theory. From the principal-agent theory and property rights incentive theory, if want to fully stimulate the enthusiasm of senior managers, enough scientific compensation must to be set up to motivate them to improve the performance of the company. When management does not hold the shares of the company, they tend to choose the short term but high yield investment projects, the purpose is to achieve high monetary remuneration in the short term, and not pay attention to the long-term health of the company, which will result in the short-sighted behavior of executives, and when hold the company’s shares, they will tend to choose a long-term investment projects, to improve the future performance of the company for the purpose, and then make their own interests to obtain long-term protection. Thus, in a certain extent, equity incentive can effectively motivate management to make long-term decisions for the company. But in the formulation of the compensation incentive plan, the company not limit to the study of the size of the level of incentive, but also pay attention to the reasonable salary incentive structure.Based on this, the paper selects China’s A-share listed companies empirical analysis from 2011 to 2013, and process sample data by making use of normative analysis and panel regression. In this paper, the model is based on the monetary compensation of executives and the proportion of executives as independent variables, and the introduction of relevant control variables, the use of more scientific panel data for model estimation. The study found that the monetary compensation and corporate performance (ROA) of executives have a significant positive correlation. In our country, the use of monetary compensation incentive management to improve corporate performance is still a very effective way, companies should be more reasonable use of this incentive, prompting senior managers to create a higher efficiency and make unremitting efforts, but also discovered that the significance that is between shareholding ratio and enterprice performance is also positive, which shows that although the use of equity incentives in our country is relatively late, the system is not very perfect, but its incentive effect is still obvious. Chinese enterprises should fully realize the long-term benefits of equity incentives, so that their incentive to play a full role, and thus to improve the performance of the company to play its due role. Finally, this paper explores the impact of the combined effect of monetary compensation incentive and equity incentive, the research conclusion shows that these two kinds of incentive measures can promote the cooperative use of the incentive effect, which shows that the enterprise should pay more attention to the arrangement of incentive structure, and the incentive structure will produce more incentive effect.This article through the research analysis, findings may have the following innovations:first of all, equity incentive choose not to exercise of the equity incentive total/announcement of the total share capital of the company the indicators to measure, compared with the proportion of management shareholding more scientific and reasonable; secondly, this paper carries on the empirical analysis, the monetary compensation incentive and equity incentive of the coordination effect were studied, compared with some previous studies, this paper not only on incentive level were studied also explores the incentive structure of the problem. Although this paper has been studied in the study, all aspects of the factors are considered, but due to the limitations of time and personal ability and some objective factors, this paper still has many shortcomings:First of all, the paper analyzes the characteristics, such as monetary compensation, equity incentive ratio, company performance and so on, only the minimum, maximum and mean value are analyzed. The paper makes the analysis on the problems of the enterprise’s performance. Secondly, the analysis is not comprehensive and complete. Secondly, the analysis is not deep and too general. In this paper, some problems are avoided. Using linear regression to carry out empirical research, but the variation is not necessarily a strict linear relationship, which need to be further studied and discussed in the future.