Research On Executive Compensation And Corporate Performance Of Private Enterprises Based On Political Connection

In the context of institutional transformation and economic structure upgrade,the government control is weakened,the role of market configuration has been enhanced.The private economy in China has developed rapidly,enabling many private enterprises to have a substantial share in the capital market of the country e.g.IPO,shell,etc.However,the development of China's market system is not as perfect as it ought to be;there is great uncertainty in the development of private enterprises.In order to make up for the difficulties in the development of private enterprises,which caused by the defects of the system,many private enterprises choose to hire senior executives who have served as government officials,people's congresses and CPPCC members to express the interest demands of private enterprises and promote the development of private enterprises.Moreover,when private enterprises are motivated by remunerations from politically connected executives,this inherent factor of political relationship would be associated with the level of executive pay and the sensitivity of salary performance.The background of China's economic system coupled with the development status of private sector,this thesis attempts to commence the argument from the perspective of political connection,and background of the executives in private enterprises,to study the relationship and function between the three parties viz.political connection,executive compensation and private enterprise performance.Therefore,this thesis focuses on the following four aspects: Firstly,to verify the incentive effect of executive compensation,and secondly,to study the impact of political connection on the performance of private enterprises.Then,addresses the influence of executive compensation on the performance of private enterprises under the influence of political connection,and finally,looks at the impact of political connection on excess compensation and private enterprise performance.This thesis selected 510 privately listed companies in China for 2012�2016 years as the research sample.This was achieved by setting up a regression model to test the incentive effect of executive compensation.Through using excess pay as a variables to measure the self-interest of the executives,the relationship between executive compensation,excess pay and private enterprise performance caused by political connection was studied.The findings are as follows:(1)There is a significant positive correlation between executive compensation and private enterprise performance;(2)The political relationship is also positively related to the private enterprise performance;(3)The stronger the degree of political connection,the more obvious the incentive effect of executive compensation was,and the more it can improve private enterprise performance;(4)Political connection deepen the negative correlation between executive compensation and private enterprise performance.On the basis of the conclusions of the study,we put forward relevant policy recommendations from the two levels of government and private enterprises.The purpose is to establish compensation mechanism based on real performance,improve the level of management in private enterprise and to promote the development of private enterprises healthy.The innovation point is: Based on existing research,the measure of political connection is more refined.Thus,two aspects can be reckoned i.e.whether there are political connection and the degree of strength of these political connection.This thesis put the non market factors such as executive political connection into the study of executive compensation and corporate performance,in addition,considering whether executives will get excess compensation for this political connection and grab corporate performance.