Media Coverage And Executive Compensation Stickiness

As we enter the 21st Century,with the improvement of market economic system and the deepening of compensation system reform in China,there is a robust positive relationship between executive compensation and firm performance.However,there are some serious problems with the incentive systems in Chinese listed companies,notably the stickiness of executive compensation in some listed firms.That is to say,when performance increases,the rate of compensation increases is significantly higher than the rate of compensation drops when performance decreases.While in recent years,media coverage which can serve as an important external governance mechanism draws more and more investors' and scholars'attention.Because executive compensation relates to fairness,justice,corruption and rent-seeking.Besides,in recent years executive compensation reform on state-owned enterprises has steadily advanced and deepened.So the executive compensation question becomes the focus of investors,even like us ordinary people.There is very little literature which explore how to ease the stickiness from the media coverage perspective.Based on these,this paper tries to study whether media can play the governance role on the stickiness of executive compensation in the background of the serious stickiness of executive compensation and high focus on executive compensation.Firstly,this paper reviews the literature on media coverage and compensation stickiness.Then,this study analyzes based on the agency theory,the optimal contracting approach,the managerial power theory,the two-factor theory and the media governance theory.After that,this paper poses hypotheses and construct several models based on literature and theoretical basis.Then,this study chooses A-share listed companies from 2011 to 2016 as samples to investigate the stickiness of compensation.The results show that:(1)Ceteris paribus,the stickiness of executive compensation widely exists in listed firms;(2)Media coverage can constrain the stickiness of executive compensation in listed companies;(3)Compared with non-SOEs,the role of media coverage in constraining the executive compensation stickiness is more significant in SOEs;(4)There is a substitution effect between media coverage and internal control.That is to say,compared with the high internal control level companies,the role of media coverage in constraining the executive compensation stickiness is more significant in low internal control level companies.This paper which explores the stickiness of executive compensation from the media coverage perspective enriches the literature of compensation stickiness and also can play an important role on the governance of executive compensation in Chinese listed firms.