Executive Compensation Stickiness,Ownership Characteristics And Budgetary Slack

As an organizational planning tool,budget plays many important roles.It is a common method to optimize resource allocation,diversify business risks,control daily activities,realize strategic goals and planning of enterprises,and evaluate subordinate performance.Due to the impact of other factors,such as budgetary slack,budget management effectiveness is controversial in practice.At present,most domestic literature on budgetary slack indicates that budgetary slack is affected by the principal-agent relationship,and that budgetary slack is regarded as a principal-agent problem and an opportunistic behavior of agents.And the principal-agent perspective as one of the important areas about budget research,its depth and breadth of research does not match the research of existing principal-agent theory.In addition to this,many companies still use traditional budget management models and executive incentives to link the achievement of corporate budget targets with the level of achievement and the compensation of executives.Therefore,executives have sufficient incentives to maximize their own interests by using the superiority information to influence the formulation of budget targets to increase the possibility of budgetary slack.The existence of executive compensation stickiness reduces the sensitivity of pay-performance,which may weaken the impact of budget goal completion on executive compensation,which in turn affects the possibility of executives building budgetary slack.In summary,there may be a certain logical relationship between executive compensation stickiness and budgetary slack.In the context of this research,this paper takes the budgetary slack as the starting point.Based on the analysis of the motivation and economic consequences of budgetary slack,we use other scholars' studies about the executive compensation stickiness and budgetary slack to explore the relationship between executive compensation stickiness,ownership characteristics and budgetary slack.This paper selects the panel data of Shanghai and Shenzhen A-share listed companies in 2010-2016 as the research sample,uses the budgetary slack models which are constructed by Zheng Shiqiao and Pan Fei to describe the budgetary slack in multiple dimensions and discusses whether there is a difference between the relationship under different ownership characteristics.The research shows that:(1)The negative impact of the executive compensation stickiness in non-state-owned enterprises on budgetary slack is more significant,while there is no significant correlation in the state-owned enterprises and the full sample.Indicating that,although the construction of budgetary slack will create space for executives to pursue their own interests,thereby improving performance evaluation,increasing interest compensation and hedging uncertainty,the presence of executive compensation stickiness will help to undermine their incentives to build budgetary slack.(2)The increase in management expense ratio will weaken the negative impact of executive compensation stickiness on budgetary slack and this mechanism is more obvious in non-state-owned enterprises,indicating that the existence and growth of management expense ratio will reduce the degree of dependence of executives on compensation,thereby reducing the incentives for executives to respond to unfavorable changes in personal compensation through the construction of budgetary slack.(3)Regardless of whether it is a state-owned enterprise or a non-state-owned enterprise,the change in the shareholding ratio of executives has no significant impact on the relationship between the executive compensation stickiness and budgetary slack,indicating that the phenomenon of low and zero shareholding is more common in China.Thereby,the level of consistency between the interests of senior executives and shareholders is low.The negative impact of budgetary slack on their equity interests is small,and the consistency effect of executive shareholding cannot be fully reflected.(4)The higher the concentration of equity,the smaller the negative correlation between executive compensation stickiness and budgetary slack,indicating that the higher the concentration of equity,the greater the degree of constraint on the individual opportunistic behavior of executives,the lower the possibility that executives will make decisions that are beneficial to their own interests and are harmful to the interests of the company,thereby reducing or even distorting the sensitivity of executive pay and budgetary slack.Based on the results of empirical analysis,this paper finally gives countermeasures suggestions from three aspects: establishing scientific and reasonable performance evaluation and salary incentive mechanism,constructing a perfect budget management and supervision system,establishing a responsibility center and constructing a reward and punishment system.Based on the principal-agent theory,this paper studies the impact of executive compensation stickiness on budgetary slack under different ownership characteristics,and proves that there are differences in the mechanism of executive payroll stickiness on budgetary slack under different ownership characteristics.It is beneficial to improve the level of corporate budget management in China and to provide policy recommendations for the improvement of China's enterprise resource allocation efficiency,executive performance appraisal and incentive supervision mechanism.