Management Power, Corporate M&A And Executive Compensation

For a long time, the western scholars, based on the mature capital market, continuously explore and development corporate M&A, set up a complete set of corporate M&A theories. Under the different system background, the economic market and the law regulations of our country is not yet perfect, so the western corporate M&A theories would be inappropriate to explain our country’s corporate behaviors. The defects of the system of state-owned property constantly improve the management power; Multiple principal-agent relations existing in state-owned corporate don’t make the corporate shareholders fulfill the responsibility of the supervision and management, and the manager market and the third party supervision can’t effectively supervise management. With the continuous improvement of management power, the corresponding compensation has not been increased. The nonidentity of the right, responsibility and profit prompts the management to start power rent-seeking, alienate corporate behavior, and implement irrational corporate M&A.According to principal-agent theory, due to the separation of ownership and management in modern enterprises, there are potential conflicts between shareholders and management. The enterprise decision-making of management as the "economic man" must be in accordance with their own interests. So the management opportunism behaviors are likely to exist in M&A. State-owned assets supervision and administration commission limits the executive compensation in state-owned enterprises, which leads to the relative distortion of management compensation structure. In addition to the assessment of the remuneration of the enterprise scale and management difficulty, M&A will quickly expand the scale and improve the difficulty, bringing higher compensation.Based on previous literatures, this paper introduces the management power, and goes on according to the main line of "management power, corporate M&A and executive compensation". Based on the power rent-seeking theory, management theory and principal-agent theory, it explains how to use power to implement enterprise M&A and improve their remuneration. The management power, corporate M&A and executive compensation are organically combined to reveal the internal motivation of state-owned enterprise M&A, hoping to provide theoretical guidance for the current reform of the pay structure and regulatory authorities.On the basis of literature review and theoretical analysis, this paper selects 1084 state-owned enterprises in Shanghai and Shenzhen A shares as the initial research sample from 2008 to 2013. Firstly, based on the rent-seeking theory and the special property system of state-owned enterprises, the paper analyzes the centralized management power and the publicity of the state-owned enterprises, which makes the management have the ability and motivation to implement the M&A. Further, based on the theory of principal-agent theory, management theory and the background of the compensation control of state-owned enterprises, the paper analyzes how the management uses power to improve the remuneration through M&A. On the basis of theoretical analysis, this paper builds a model to carry out empirical test. The empirical results show that in our state-owned enterprises, the greater the management power, the bigger the number and scale of M&A; the greater the management power, the higher compensation by increasing the number and scale of M&A. According to the results of the research, the opportunistic behavior of the management likely exists in M&A. Therefore, we should improve the management and supervision mechanism, the information disclosure system and the incentive assessment methods, to reduce the management opportunistic behaviors.This paper is totally six parts.The first part is the introduction. This chapter first introduces the research background and significance, and then describes the research ideas and methods, and finally illustrates the possible innovation of this paper.The second part is literature review. This chapter reviews the relevant literatures mainly from the management power, corporate M&A and executive compensation. On the basis of the previous literature research, from the enterprise management level and the perspective of management power, it analyzes how the management influences the corporate M&A and improves the executive compensation under the special institutional environment of our country.The third part is the theoretical analysis and hypothesis deduction. In this chapter, two hypotheses are put forward on the basis of theoretical analysis. Firstly, based on the theory of rent-seeking and the property system of state-owned enterprises, from the perspective of enterprise decision makers, it reveals the influence of management power on enterprise behavior. Then, according to the theory of principal-agent theory and management theory, management power, M&A behavior and executive compensation are placed in an analytical framework to analyze.The fourth part is the research design. This chapter firstly introduces the data source and sample selection criteria, and then analyzes, defines and measures the key variables of this paper, and sets the control variables, finally construct regression model on empirical research.The firth part is the empirical analysis and results. This chapter mainly analyzes the relevant data. Based on the multiple regression model, the executive compensation as the explained variable, the management power, the number and scales of M&A as explanatory variables, and other factors as control variables are analyzed by descriptive statistical analysis, correlation analysis, regression analysis and robustness test. Empirical analysis results show that the greater the management power, the bigger the number and scale of M&A. While in the M&A, the compensation will be significantly improved.The sixth part is the research conclusions and recommendations. This chapter summarizes the main research conclusion. Then according to the opportunistic behavior of the management in M&A, the related suggestions are put forward. At last, it points out the shortcomings of this study and the direction of future research.