Research On Executive Compensation,Cash Dividend And Firm Value Of Chinese Listed Companies

With the separation of ownership and management to the modern enterprises,there comes agency relationship.Principals own property rights and residual claims while agents manage and control companies.Information asymmetry and interest conflict between principals and agents make how to design scientific and rational compensation contracts so as to efficiently motivate management teams to lower agency cost and maximize firm value a hot topic in the area of corporate governance.Many Chinese researchers have conducted theoretical and empirical studies on executive remuneration and published a number of academic papers in recent several years.However,we can conclude that most studies have focused on the relation between executive compensation and firm performance as well as influence factors of executive pay.Similarly,influence factors of dividends,the applicability of dividend theories and market reaction of the announcement of dividend news have been studied for many years.The relationship between dividends and executive pay is still a problem worthy of more attention and further study.How does executive compensation affect firm performance and market value as an incentive mechanism?Because paying cash dividends brings the reduction of retained earnings and cash flow,can it lead to less company-paid consumption?Companies may need to issue stocks or debts to finance new investment opportunity after the payout of dividends and it will widen the supervision and constraint of stockholders and creditors.Can cash dividends lead to lower agency cost and higher firm value?Furthermore,does higher level of executive compensation cause lower level of cash dividends?Do cash dividends and executive compensation substitute for each other?Do they have combined function to increase or decrease firm value?We need further present research to solve all the above questions.This dissertation has conducted a systematic research of executive compensation,cash dividends and firm value of Chinese listed companies through normative and positive ways in order to explain the mechanisms of how executive remuneration affects firm value,how cash dividends affect firm value,and whether cash dividend is an intermediary variable or an interactive variable in the process of executive compensation exerting influence on firm value.Main findings of this paper include:(1)Executive monetary compensation of Chinese listed firms has a positive impact on cash dividends.Companies whose executives hold stocks pay more cash dividends than those whose executives have no shareholdings.There is no significant linear relation between executive equity compensation and cash dividends.(2)The payout of cash dividends can enhance market value of listed firms significantly.It implies that cash dividends signal a better prospect of the firms.(3)There is a positive correlation between executive monetary compensation and firm value as well as executive equity compensation and firm value.(4)Cash dividend is an intermediary variable between executive monetary compensation and firm value while it is an interactive variable when executive equity compensation affects firm value.Main contributions of this paper are as follows:(1)It has conducted a systematic study about how executive compensation affects firm value and riched research fruits.(2)It has confirmed that executive compensation promotes the level of cash dividends besides market value of firms,providing an effective incentive method to increase cash dividends of listed companies.(3)It gives an empirical result about the role of cash dividends in influence mechanisms between executive monetary compensation and market value of firms,as well as between whether executives hold stocks or not and market value of firms for the first time.The paper provides empirical evidence and suggestions about executive compensation incentive system to push the development of executive incentive theory,deepen executive remuneration reform and help to establish scientific and reasonable incentive mechanism.The paper gives empirical results and theoretical support to dividend policy put forward by China Securities Regulatory Commission and listed companies.The paper confirms that cash dividends and executive equity compensation jointly play an active role in the increment of shareholder wealth of Chinese public companies.