Stickiness Of Executive Compensation And Total Factor Productivity

As China’s economic development mode is gradually shifting to high-quality development mode,enterprises should also pursue more scientific ways to promote performance in order to achieve high efficiency and high-quality development.Rational and scientific corporate governance model will have a qualitative impact on corporate performance,and executive incentive,as an important part of corporate governance,plays a decisive role in corporate performance.Therefore,how to promote corporate performance through executive motivation is the main topic of theoretical and practical research.As a kind of corporate governance mechanism,executive incentive mechanism can effectively motivate executives through the design of executive compensation contract,bind the interests of executives and shareholders to promote their hard work,so that enterprises can obtain long-term benefits.As an embodiment of the long-term interests of enterprises,total factor productivity(TFP)is promoted from long-term investment projects such as resource allocation efficiency and human capital that are difficult to return in the short term.Therefore,to improve the total factor productivity of enterprises,shareholders may need to design a reasonable incentive mechanism for executives to tolerate the decline of corporate performance when executives invest resources in the early stage.By forgiving short-term performance decline and rewarding long-term success,sticky executive compensation contracts can promote their hard work and ultimately promote the improvement of total factor productivity.Therefore,this paper mainly studies the impact of executive compensation stickiness on the improvement of enterprise total factor productivity.This paper studies executive compensation stickiness based on optimal contract theory and information asymmetry theory,and further expands related research with agency theory and failure tolerance theory.At the same time,this paper studies total factor productivity based on endogenous growth theory.The research draws the following conclusions: First,the stickiness of executive compensation is universal.Based on the measurement results of executive compensation stickiness,this paper shows that about 78.51% of enterprises in China have stickiness of executive compensation,which indicates that stickiness of executive compensation is a common phenomenon.Secondly,the main effect regression results show that the stickiness of executive compensation can effectively promote the improvement of enterprises’ total factor productivity,indicating that the stickiness of executive compensation has a promoting effect rather than a inhibiting effect.In addition,the above conclusion is still significant after a series of robustness tests and endogeneity tests,indicating the reliability of this conclusion.In addition,through the mediation effect test,it is found that the stickiness of executive compensation ultimately achieves the purpose of improving total factor productivity by improving the level of internal control of enterprises.The essence of internal control is "checks and balances" and "supervision".Therefore,the stickiness of executive compensation mainly improves the level of internal control by enhancing "checks and balances" and "supervision",thus promoting total factor productivity of enterprises.Finally,based on the existing research,this paper makes a further study on the heterogeneity of property rights.It is found that executive compensation stickiness,as an incentive mechanism for executives,only has a positive and significant promoting effect in non-state-owned enterprises.However,in stateowned enterprises,total factor productivity is inhibited by the stickiness of executive compensation and the relationship between them is not significant.Theoretically,this paper expands the relevant factors that affect the total factor productivity of enterprises,and studies the consequences of executive compensation stickiness to a certain extent.In practice,this paper provides some enlightenment for corporate compensation makers: in order to maximize the interests of shareholders,corporate compensation makers should formulate reasonable incentive mechanisms to tolerate short-term performance decline of executives and reward long-term success.