Research On The Relationship Between Government Subsidies And Executive Compensation Stickiness Moderated By Management Power

In recent years,executives of listed companies “out-sized pay” phenomenon is often exposed to public,and it causes the extensive concern from different sectors of the society.The optimal compensation contract theory believ es that the discretion of the executive compensation should be link to enterprise performance,and there should be a positive correlation between them,so it can effectively motivate executives doing their best to create value for the company.However,in many enterprise,executive pay is still rising even there is a drop in corporate earnings,and this has become common phenomenon.Many scholars’ study shows that executives can easily use their own power to influence the process of making the compensation plane due to the lack of external and internal supervision.They grab the rent and use asymmetry information to damage the interests of shareholders.As early as in 2008,foreign study show the existence of viscous characteristics in executive compensation,it means that the executive pay marginal increase more when the corporate earnings increase,however executive pay marginal decline less when there is reduction in performance.Since the reform and opening,our country establish the socialist market economy with Chinese characteristics,so the relationship between the government and the market is more and more closely.The authorities often use government subsidies and relevant policy to intervene the operation of the enterprise.The scale of Government s ubsidies are large,and it can even lead loss to profitability.Government subsidies bring much help to business performance.In the first quarter of 2016,Lens Technology Co.,Ltd.,the company lossreaches 74 million yuan according to the financial data i n addition to non-recurring profit and loss.In non-recurring profit and loss,the largest revenue is government subsidies,totaling 246 million yuan.Government subsidies is a noise which affects corporate performance,and it has nothing to do with the ma nager’s own efforts,but it may be manipulated by executives to increase their own interests.We review the literature of government subsidies and executive compensation in the first part,we focus the research on the relationship between government subsidies and compensation stickiness;Secondly,based on the analysis of the relationship of government subsidy and remuneration,considering our country’s listed companies system background,we put forward the hypothesis.In this paper,we use descriptive stat istics and regression analysis methods,and selecte the Shanghai and Shenzhen A share listed companies from 2011 to 2015,examine whether the correlation between executive compensation and government subsidies will be moderating by corporate performance an d explore the relationship between executive pay stickiness and government subsidies.The empirical results show that :(1)when the company’s performance decline,the correlation between executive compensation and government subsidies are more significantly;(2)the government subsidies is positively related to the executive pay stickiness;(3)management power will enhance the relationship between government subsidies and the executive pay stickiness.The government subsidy has no relationship with the managers’ efforts,but it is a noise affecting corporate profits,especially when business performance declines,in order to maintain profitability,management are more likely to manipulate the government subsidies,thus increase the stickiness of the listed company executive pay.Management have power of affairs and decision-making,so the relationship between government subsidies and compensation stickiness may be moderated by management power.By analyzing the results,this paper try to proposed suggestion to solve the executive compensation stickiness and regulate the use of government subsidies.