Exchange Front-line Supervision And Stickiness Of Executive Compensation

The report of the Party’s Twenty Major Congress profoundly pointed out that China needs to "strengthen and improve modern financial supervision,bring all kinds of financial activities into supervision according to law,and keep the bottom line of no systemic risk",which undoubtedly raised the financial supervision in risk prevention and control further to the national strategic perspective.Under the background of the comprehensive registration system reform,in order to promote the healthy and high-quality development of the capital market,optimize the financial regulatory system and promote the formation of an efficient and coordinated regulatory pattern,it is imperative to strengthen and innovate the regulatory methods.The inquiry letter regulation,which is used more and more frequently in the firstline regulation of exchanges,has attracted extensive attention from the academic community with its non-punitive preventive regulatory characteristics.As an important means of postaudit,it is not only a major reform of the supervision mode of information disclosure,but also a further implementation of the concept of "deregulate and strengthen supervision" in the supervision of the capital market.At present,the relevant research on inquiry letter is just emerging in China.This paper chooses to explore from the perspective of stickiness of executive compensation.Under the hypothesis of compensation contract theory,executive compensation is highly positively correlated with company performance,but the stickiness of executive compensation still exists despite much controversy.In order to alleviate the stickiness of executive compensation to a certain extent and improve the effectiveness of compensation contract,it is a relatively innovative attempt to introduce the regulatory power of inquiry letter.Based on its governance effect and the reason for the stickiness of executive compensation itself is an agency problem,there may be a relatively obvious relationship between them.Based on the inquiry letters issued by the stock exchange to A-share non-financial listed companies in Shenzhen and Shanghai from 2015 to 2021,this paper further extracts phrases related to compensation from the inquiry letters and takes them as samples to study their influence on the stickiness of executive compensation.It is found that the stickiness of executive compensation will decrease significantly after receiving the compensation inquiry letter,and this inhibitory effect is more obvious in the enterprises with better internal control and governance.From the perspective of fairness of compensation distribution,the compensation inquiry letter has a more significant improvement effect on the stickiness of executive compensation in the sample companies with negative external inequality of compensation.Further,from the perspective of implicit compensation,this paper also discusses whether the compensation inquiry letter can really improve the effectiveness of compensation contract,and finds that the governance effect of the compensation inquiry letter on the stickiness of executive compensation has a "spillover effect" among comparable companies in the same industry.The exploration and innovation of this paper may be reflected in the following aspects:First of all,under the framework of agency problems and other causes of stickiness of executive compensation,this paper includes the regulation of remuneration inquiry letters into the governance mechanism of stickiness of executive compensation,which provides new empirical evidence to enrich the effectiveness of the inquiry letters and the economic consequences of the inquiry letters under the innovative regulatory approach in China.Secondly,this paper provides a new idea for expanding the research on the influencing factors of stickiness of executive compensation: Existing studies have focused more on nonregulatory factors such as enterprise innovation,corporate social responsibility information disclosure,and mixed equity reform.From the perspective of securities regulation,this paper explores the factors affecting the stickiness of executive compensation by means of salary inquiry letters issued by exchanges,providing useful references for key issues such as systematically improving the effectiveness of management compensation contracts and standardizing the information disclosure of senior executives of listed companies.Finally,according to the research conclusion of this paper,the regulatory authorities can make use of the spillover effect of the compensation inquiry letter to select listed companies in some industries to focus on supervision,so as to achieve the warning effect of "shaking the mountain and shaking the tiger",so as to improve the efficiency of supervision.