Research And Sensitivity Analysis Of Executive Behavior Based On Information Disclosure Of Compensation Contract

Compensation contracts are an important window for direct dialogue between companies and senior management,and compensation contracts for corporate executives are generally regarded as an important corporate governance model to alleviate agency problems,with the general meeting electing the board of directors,and the board hiring executives and formulating their compensation contracts.Under this model,the ownership and management rights of enterprises are highly separated,shareholders and social investors are on the disadvantage side of information asymmetry,while company executives are on the side of information resource advantage,and because of the lack of effective supervision,corporate executives as "rational economic people" have full motivation to use their information resource advantages to influence the compensation contract and encroach on the interests of the enterprise,which leads to conflicts of interest and differences between shareholders and executives.At the same time,due to the increasing prominence of the information asymmetry between shareholders and executives,a series of corporate governance problems have been triggered,and serious irrationality of executive compensation has occurred,which in turn directly affects the behavior of other managers and the loss of corporate talents,affecting the competitiveness and operating conditions of enterprises,which cannot be ignored by corporate governance.Unreasonably high remuneration does not bring due returns to shareholders,and excessive remuneration is completely deviated from the performance of the enterprise,becoming a new cost for the enterprise.Therefore,weakening the impact of information asymmetry and disclosing information on executive compensation is crucial to the protection of the right to know and the protection of legitimate interests of corporate shareholders and investors.This paper explores the impact of compensation contract disclosure on executive behavior,discusses it from two aspects,and obtains some conclusions that have certain reference significance for empirical research.Firstly,based on the premise of principal-agent relationship and active market competition,a Cournot duopoly market is established,competitive parameters are introduced into the original differentiated Cournot model,and a principal-agent model with competitive parameters is constructed under the conditions of agent participation constraints and incentive constraints.Taking whether the executives of the enterprise can observe the incentive contracts of competing enterprises as the disclosure condition,and assuming the corresponding value under undisclosed conditions,the reverse induction method is used to solve the problem of maximizing corporate profits under disclosure and non-disclosure conditions.Through the control variable method,the relationship between executive effort level,firm output,firm expected profit,and total executive compensation and competition level in the model is discussed.Finally,under the influence of competition in different markets,we find that executives do not work harder in a more competitive environment when the compensation contract is not disclosed,and they work harder in a more competitive environment when the compensation contract is disclosed.In addition,some conclusions obtained from the study can be used as useful references for empirical research,for example,mandatory disclosure of compensation contracts can improve the sensitivity of compensation performance and the total compensation of managers.Next,we start with strategic contracts,in which companies do not operate in a vacuum,but in strategic interactions,and under the conditions of information disclosure,each company will take into account the information of its competitors in the strategic contract.Combined with the literature,we assume that a strategic contract is a contract formulated to consider the short-term value of an enterprise,and in order to pursue competitive advantages in the current market,enterprises make executives adopt active investment strategies,which in turn causes competitors to dare not actively invest,so as to achieve their own goals.Without disclosure,strategic contracts do not exist.Combined with strategic contracts,construct a principal-agent model that includes the short-term value and long-term value of the enterprise,and discuss it from the perspective of balanced investment strategy.It should be noted that considering that there are many uncertain factors in the market competition,in the model,we assume that cost is an uncertain variable to study.We found that when compensation contracts are not public,companies only pay executives based on long-term value.However,when compensation contracts are disclosed,companies may deliberately tie executive compensation to short-term values to induce managers to overinvest and gain a competitive advantage over competitors.Shortsighted overinvestment by managers ultimately increases competition and reduces corporate profits.In addition,the study found that disclosure systems can be associated with higher consumer and social welfare,as greater competition drives down product prices and benefits consumer and social welfare.Finally,the full text is summarized and the problem research is prospected.