An Empirical Study On Managerial Power And Executive Compensation

Over the past decade, Chinese listed commercial bank executive compensation has been maintained at a high level, and it exceed the average level of A-share listed companies in most other industry, which aroused widespread concern. Since 2009, the government issued a "salary limit order" for the executives of listed commercial banks, it require all the executives compensation shall not be higher than 2.80 million yuan. The listed state-owned commercial bank executive compensation growth rate are limited, but there are no joint-stock commercial bank executive salary generally affected.Insider controlling is a problem for corporate governance which is widespread in state-owned listed companies. These executives can interfere with the operation of the board to increase its ability to bargain with the board on compensation arrangements, which making the executive compensation may deviate from the optimal compensation contract theory advocated by the "optimal state" and lost incentive effect, some state-owned listed companies even appeared the "customized compensation" phenomenon.According to the principal-agent theory, the demand of compensation management generate in the separation of ownership and management rights, and executive compensation of listed companies generally determined by the board of directors to discuss, but the "customized compensation" phenomenon has become a new agency problem, which is contradict with the purpose of the principal-agent theory. On this phenomenon, the managerial power theory took more persuasive explanation.The current research results of scholars both at home and abroad mainly in the state-owned listed corporate governance structure impact on executive compensation or pay-performance sensitivity. Because of the significant industry characteristics, it is necessary to analyze the managerial power of state-owned listed companies. Some scholars think the managerial power is management's ability to fulfil its own desire. This paper argues that the managerial power is the result of internal governance structure defects.On the basis of the relevant literature and the facts of the internal governance structure of China's listed commercial bank, the article analyzed the impact of Chinese listed commercial bank managerial power on executive compensation. The article framework are as follows:Chapter one is an Introduction. First of all, the chapter on the basis of China's listed commercial bank executive compensation situation on the realistic background, explained the practical and theoretical significance of the research. Then, this paper put forward the ideas and methods of writing, which is based on the previous research results, and identified four dimensions of managerial power. This paper used empirical panel data fixed effects model to analyze the influence of managerial power on executive compensation. Finally, the paper points out the innovation characteristics of this article may more targeted on analyzing the influence of managerial power on executive compensation of China's commercial bank. Besides, this paper examined respectively the impact of the chairman or president tenure on executive compensation. At the same time, the Inadequacies of this article may don't consider the executives'recessive income and equity-based incentives. Moreover, the paper also without considering the impact of "anger costs" and government regulation on executive compensation.Chapter two is literature review. This chapter defined the concept of pay, company executives and managerial power. The paper identified four dimensions of managerial power:whether the president is also the chairperson of the board, the proportion of the first largest shareholder and the equity restriction ratio, the size of the board and the percentage of independent directors, executive tenure.The third chapter intruded the principal-agent theory, the operator defense theory, the optimal compensation theory and theory of managerial power.The fourth chapter described the explanatory variables, explain and control variables, the regression equation.Chapter five are empirical results and analysis. At first, the chapter analyzed the executive compensation-related variables, e.g. the proportion of the first largest shareholder, ownership concentration, and board size, the proportion of independent directors, chairman or president tenure. Secondly, this paper carried out the multicollinearity test, stability test, Hausman test, and establish a fixed effect model. Finally, this chapter analyzed the reason of ownership concentration and president tenure did not cause by test.The sixth chapter are conclusions and recommendations. The proportion of the first largest shareholder and the percentage of independent directors, the size of the board, chairman tenure has positive impact on executive compensation, but the equity restriction ratio and president tenure have no significant impact on executive compensation. According to the above conclusion, the paper point put forward policy recommendations.