Executive Compensation Regulation,Reference Point Effect On Firm Performance

Among state-owned enterprises,most executives are directly appointed by the government,and their remuneration has been widely concerned by the community.In recent years,the pay of executives of state-owned enterprises has risen rapidly year by year.The pay gap between executives and ordinary employees has also widened.In order to form a reasonable income distribution system for senior executives and ordinary employees,China has successively promulgated "The Directives on Remuneration Management of Corporate Responsible Persons"and "Reform Plan on the Remuneration System of Personnel Responsible for Central Management Enterprises" and other systems regulate the remuneration of senior executives of state-owned enterprises.State-owned enterprise executive compensation regulation policy is the focus of the state-owned enterprise's compensation system,affecting the behavior of senior executives and corporate performance.The executive compensation policy of the central SOE executives not only affects the compensation level of the senior managers of the SOEs,but also can be transmitted through the external competition strategies(including leading compensation,follow-up compensation,lagging compensation,and mixed compensation).For enterprises with different ownership structures that are not subject to policy restrictions,the overall compensation expectations of the manager market are reduced.This paper studies the impact of compensation regulation on corporate performance from the point of Reference Point Effect,and studies the use of Chinese listed companies' A-share 2013-2016 data to test the effect of reference point effect on corporate performance,and test the impact of compensation regulation on relationship between reference point effects and corporate performance.The research results prove that:(1)The executives of listed companies in China have a clear reference point effect on their salaries,that is,the senior executives of listed companies will use the average executive compensation of the same industry,the same region,and the same type of enterprises as the reference point;(2)The subjective psychological perception triggered by reference point effect has an important influence on business performance.Specifically,when the executive compensation is lower than the average executive compensation of the same industry,the same region,and the same type of enterprises,the executives will have a negative psychology of loss aversion.The reduction in the level of effort of the executive has reduced the performance of the company;(3)The degree of compensation regulation has a regulatory effect on the reference point effect and corporate performance,that is,when the executive compensation level is lower than the average executive compensation of the same industry,the same region,or the same type of enterprises,the higher the degree of executive compensation regulation,the lower the corporate performance.