The Impact Of Corporate Reputation On Executive Compensation In China

This paper investigates the impact of corporate reputation on executive compensation in China,which can make a reasonable explanation for the behavior of the enterprise to build and maintain a positive corporate reputation from the aspect of internal incentives,and more cause the enterprise to pay attention to the reputation,help the transformation of domestic enterprises' thinking,and help Chinese enterprises gain greater visibility and greater influence within the scope in the world.From the theoretical summary of theories,corporate reputation has three characteristics of lagging,long-term and accumulative.From the analysis of existing theoretical and empirical research results,there are two ways for corporate reputation to affect executive compensation.From the standpoint of executives,a positive corporate reputation can,on the one hand,form a good personal image of executives,and on the other hand,as an executive who is better than others,enrich his resume and pave the way for his future career.From the standpoint of the enterprise,the positive corporate reputation can enhance the bargaining power of the internal compensation management committee and reduce the reputation premium required by the executives in compensation;on the other hand,the star companies with better corporate reputation will be more exposed to the public's vision,accepting a more rigorous scrutiny by the public,and thus dare not set too high executive compensation.Combined with the actual situation of China's national conditions,state-owned enterprises and non-state-owned enterprises may directly have different effects on executive compensation due to the huge differences in corporate purposes,corporate culture,various management strategies,and executive incentives.So we investigate the difference between state-owned enterprises and non-state-owned enterprises then.From the perspective of executives themselves,in addition to considering their own business image,executives in state-owned enterprises need to consider the maintenance of their political image for their political future,and their reputation is higher than that of non-state-owned enterprises.At the same time,state-owned enterprises The positive corporate reputation in the enterprise also provides executives with additional political image advantages and political promotion expectations,prompting executives to be more willing to compromise on lower pay.From the perspective of enterprises,stateowned enterprises have problems of unclear property rights,the corporate governance structure is less rational,and the reputation premium has a greater impact.At the same time,excessive compensation in state-owned enterprises has a more direct relationship with the public and will result in the risk of loss of stateowned assets.So that state-owned enterprises are subject to more stringent public opinion.In terms of empirical evidence,this paper selects all listed companies in the Shanghai and Shenzhen stock markets from 2010 to 2017 as samples and excludes sample data that does not meet the requirements,and obtains 8080 observations of 1010 companies.In the design of variables,this paper selects the top three executives of the company whose cash compensation are highest.We define the natural logarithmic form of the sum of cash compensation for executives is used as a measure of executive compensation.For measuring corporate reputation,this paper selects the “China Top 500” list of Fortune magazine,which is widely used as a measure of the comprehensive strength of the company in public cognition.Entering the top 100 of the list serves as a standard for a positive corporate reputation.In addition,the control variables involved in this paper are the nature of the enterprise,the return on total assets,the return on stock,operating income,total assets,book-to-market ratio,corporate risk and executive term.Based on the sample data of these variables,both the OLS model and the panel regression model demonstrate that positive corporate reputation is significantly negatively correlated with executive compensation.Considering the missing factors,the lagging of the first-phase executive compensation is joint in the control variables,the conclusion that corporate reputation is significantly negatively correlated with executive compensation is still tenable.In order to discuss the effect of positive corporate reputation on executive compensation in different types of enterprises,this paper analyzes the sub-samples of state-owned enterprises and non-state-owned enterprises.The regression results show that the effect of corporate reputation on executive compensation in state-owned enterprises is more significant than that in non-state-owned enterprises.Then,this paper uses the generalized moment estimation model(GMM)to eliminate the influence of endogeneity problems.Using the lag period variable as the instrumental variable of the generalized moment estimation model,the corporate reputation can still have a significant negative impact on executive compensation regardless of whether or not to control the interaction between industry and time.In terms of channels,this paper only selects one indicator,that is,whether the CEO and the chairman are simultaneously the same person.this result confirms that the intermediary effect of the company's corporate governance efficiency channel is significant.In order to test that the empirical research carried out in this paper is not the fortuitous result of a single regression,this paper also makes a robustness test of the empirical results from several aspects.The first chapter of this paper is the introduction.The second chapter is a literature review.The third chapter is the theoretical analysis and hypothesis.The fourth chapter is the research design.The fifth chapter is the empirical analysis.The sixth chapter is the conclusion.