Research On The Impact Of Gem Listed Companies’ Executive Compensation Stickiness On Investment Efficiency

Since the economic crisis in 2008,the global economic is depressing.The executives“sky-high compensation” is not match with the decline of corporation’s performance,which has attract researchers’ attention to the rationality and validity of the performance salary system.On October 23,2009,the GEM which is known as China’s NASDAQ was launched in Shenzhen Stock Exchange.It has high growth and developing rapidly,however,by the restrictions of the shorter listed age,management and capital operation ability,in addition,with the asymmetric information,principal-agent conflict and investment-cash flow sensitivity,the opportunistic motives of the executives can easily lead to the raised funds being abused or idle.As mentioned,the over-financing of the executives would reduce the companies’ investment efficiency particularly in the GEM market.In order to test the impact and difference of GEM listed companies’ executive compensation stickiness on investment efficiency,this paper firstly summarizes the existing theory and domestic and foreign literature,and then analyzes the GEM listed companies’ executive compensation,investment and the life cycle phenomenon.After that,based on asymmetric information theory,principal-agent theory,the optimal contract theory,the life cycle theory and free cash flow theory,this paper analyzes the relationship between executive compensation stickiness phenomenon and investment efficiency in different period of development.This article selects a total of 909 samples’ financial data from listed companies on GEM from 2011 to 2015 to make empirical research.Firstly,on the basis of using Richardson’s investment expectation model to measure the non-efficiency investment level of enterprises,this study builds the relationship model.And then,this paper empirically analyses the influence and difference of the GEM listed companies’ executive compensation stickiness on the overall non-efficiency investment level,over-investment and under-investment.The results of research show that: firstly,there is executive compensation stickiness in the GEM.Secondly,the over-investment and under-investment are two common inefficient behaviors in the GEM listed companies,and the data indicates more companies having under-investment.Third,when we did not consider the life cycle,the executive compensation stickiness has significantly positive correlation with over-investment,but is significantly pessimistic related to under-investment.And we are considering the life cycle,in the growth stage,the executive compensation stickiness can sharpen under-investment but relieve over-investment;in the mature stage,the executive compensation stickiness can sharpen over-investment but relieve under-investment.In the end,this paper provides reasonable policy recommendations on the construction of executive compensation system and the investment efficiency promotion.