The Study Of The Impact Of The Chinese Bank Executive Compensation On Default Risk Under The Pay Ceiling

In order to control the increase of financial institutions' Executive pay levels,government have issued a series of pay policy after 2009,Banking executive pay at the rising stage before Pay policies enacted,and non-performing assets ratio is in decline,Executive pay has generally been declining and the bank bad assets start to rise after the Pay Ceiling,especially in 2015 the Banking executive pay is generally have fallen sharply after the salary change plan,NPL and non-performing loan ratio appear "double up" in the first time,14 sample bank executive pay an average of 1.9661 million yuan in 2016,which down 15.84%year-on-year,but the non-performing loan ratio rose 9.25%,the Pay Ceiling and the outbreak of bad bank assets can not help trigger thinking:If there is a correlation between executive compensation and the risk of default,reducing executive pay actually caused the short-term behavior of banking executives,which results in the breakout of the banking risk of default?The Pay Ceiling affects the effectiveness of the relationship between executive compensation and the risk of default?The purpose of this paper is to illustrate whether the decrease in commercial bank executive pay increase bank default risk under the background of Pay Ceiling,if there is a short-sighted that the commercial bank executives to obtain high performance pay.Whether by setting reasonable bank executive pay levels to reduce the risk of default?This article attempts to find the effective ways to reduce the bank risk of default in the perspective of the commercial Banks internal management.Based on the above background,the article adopts the method of empirical research to find the influence of commercial bank's executive pay and pay gap with commercial bank credit risk of default under the background of Pay Ceiling.Based on the principal-agent theory,theory of executive power,short behavior theory and game theory and behavior theory as the theoretical basis to analyze.Selecting 14 listed commercial Banks in China according to the properties from 2005 to 2016 as sample,which includes four state-owned Banks,seven joint-stock Banks and three city commercial bank,and executive compensation,compensation gap as explanatory variables,establishing a stable panel model of NPL with explaining variable,at the same time choosing control variable such as bank scale,capital adequacy,credit scale,the rate of economic growth and money supply growth rate,using the regression analysis method to test the relationship between executive incentive and bank credit default.The empirical results show that executive pay and bank credit has significant U-shape correlation relationship with default risk under the background of Pay Ceiling.NPL is decline with executive pay rise at start,when executive pay more than a certain level,the relationship between changes,with the executive pay rise further,the risk of default then climb.Pay gap and the credit risk of default have significantly positively relationship.The greater of the pay gap,the more hard to control of default risk.Pay policies reduced the pay gap between the bank executives-employees,low wage gap can reduce the injustice of low wage level employees,which improve the work efficiency,and enhance the recognition of the bank risk of default.According to the results of the study,this paper puts forward perfect executive compensation incentive mechanism to reduce the bank default risk.This paper consists of six parts,the specific research contents of each part are as follows:The first part:introduction.This part mainly includes the thesis research background,research significance,the literature review at home and abroad were reviewed and summarized,and introduced the thesis research ideas and methods,it points out the innovations and shortcomings of the paper.The second part:the related theoretical basis.This part is mainly the relationship between executive compensation and the risk of default theories analysis,introduced the executive pay related theories:principal-agent theory,theory of executive power,short-sighted behavior theory and competition theory and behavior theory.The third part:Mainly analyzing the current situation of commercial bank credit risk of default and the development of executive pay.The fourth part:The influence factors of commercial Banks risk of default.The fifth part:Empirical research between the influence on the credit default risk of commercial bank executive pay and the pay gap in the perspective of Pay ceiling.This part expounds the sample selection and data sources,and the selection of samples,the descriptive statistics and test,building empirical model of relationship between the risk of default and bank executive pay,pay gaps,panel model is adopted the fixed effects models,and analyze the results of regression.The sixth part:Conclusion and Policy Recommendations.This part summarizes the content of the above four parts,putting forward policy Suggestions according to the results of empirical research.