The Research On The Impact Of State-owned Enterprises' Mergers And Acquisitions On Executive Turnover And Compensation Incentive

Over the past decade,Chinese enterprises continuously implementing the mergers and acquisitions(M&A)activity on a large scale in different industries,in the world,and hoping after the M&A transactions,the overall value is greater than the sum of the value of every enterprise before the M&A,and producing the synergistic effect in the operation,finance and other aspects.In fact,this kind of trying to make acquisitions benefit maximization,the parties to implement resource allocation "pareto optimality" economic dream,often backfire,the M&A activity may not bring positive benefits to the shareholders.But,managers are still keen to seek appropriate target enterprises,extensive use of capital,time and time again to bring the M&A's boom.M&A motivation based on the theory of the agency,has the point of view that enterprise M&A is for mangers'personal gains.However,in China' s state-owned enterprises(SOE),the operating goal has the duality,which includes economic goal of value maximization,and political ones of social responsibility and political benefit,then it gives the dual identity to the executives under the dual principal-agent relationship,namely "political" and "economic" status.Therefore,starting from the motivation of M&A activities,is the purpose of executive M&A based on the double principal-agent relationship?Can M&A significantly affect executive,political and economic status promotions and compensation incentives?Secondly,from the assessment of the post M&A,whether the incentive and binding role of executive positions and salaries is significantly affected by the performance of M&A?On the one hand,are executives who implement enterprise value damaging M&A able to turnover effectively in a timely and effective manner?And whether the performance appraisal of executives' turnover is severely evaluated by other external factors,such as industry?And,for the SOE whose owners are vacant,does the power of managers play a defensive role in the process of supervision and restraint by enterprises?On the other hand,is the compensation change of executives in SOE separated from the performance appraisal because of M&A?In the relationship between the performances evaluation of M&A and executive compensation changes,does executive power play a role in promoting and compensation?And,as part of the private income of executives,does the existence of excessive job consumption provide additional security for the relationship between performance and compensation?Based on these,this paper tries to find the answers to the above questions,construct the assessment test and post test complete research framework of merger behavior prior to the motivation,explored the relationship between state-owned enterprise executives turnovers,compensation incentive and M&A behavior.The specific empirical research process and conclusions are summarized as follows:(1)In the perspective of the motivation of M&A,this paper explores the motivation of M&A on the basis of the dual principal-agent relationship of state-owned enterprise executives.Select the 2006-2015 in China's two cities of Shanghai and Shenzhen A shares listed on the main board of the state-owned company as the initial sample,use Logit model and OLS model to test how the merger decision of SOE affect promotion incentive and compensation incentive for executives.The research found that,first,SOE can significantly increase the possibility of executive promotion and compensation;secondly,when company performance is higher than the threshold value of industry performance,SOE increased executive promotion possibilities;and when the company performance is lower than the industry performance threshold value,does not have significant correlation;finally,when the company performance is lower than the threshold value,M&A can significantly enhance the executive compensation;and when the company performance is higher than the threshold value,with no significant correlation.The research shows that executive politics and economic status of SOE have different incentive objectives and lead to greater behavioral differences.When the performance is good,with better promotion prospects will be SOE as executives,as a kind of political promotion at this time,strong demand for executives in pursuit of "political" identity would inhibit the "economic"identity of self seeking and enhance the compensation motivation,try through M&A significantly increased the possibility of personal promotion;and when the performance is poor,executives may treat M&A as a pursuit of personal income opportunities,use the persue of SOE the scale oriented multiple objectives,through M&A and expansion,expanding the scale to obtain important weights and thus enhance the compensation negotiations,fill the blank when the performance is poor lack of sensitivity between performance and compensation that is,through M&A to obtain personal income is missing the opportunity to put efforts to raise a potential to enhance the performance of the company.(2)In the perspective of the restriction of the post M&A,whether the SOE executive's turnover as a "political" is evaluated and restrained by the performance of M&A.Therefore,selection of 2006-2013 in China two cities of Shanghai and Shenzhen A shares listed on the main board and the occurrence of M&A events of SOE as the initial sample,2 years after the M&A will determine whether executives turnover as the observation period(sample data interval for 2006-2015),build the two-stage model,and the relationship with Logit model test and Cox proportional risk model of SOE M&A performance and turnover.The study found that,first,whether the implementation of M&A executives create value significantly affect the possibility of the executive turnover after the M&A,the M&A performance and turnover are negatively correlated;secondly,by industry factors the company merger performance significantly increased the poor performance of the possibility of executive turnover;finally,gradually increase the executive power will be significantly reduced industry influencing on the sensitivity between M&A performance and executive turnover.The conclusion of the study shows that external factors of industry or market influence on the M&A performance was shrouded in a veil,explore the SOE performance appraisal and the nature of the person in charge of the executive,to a fair and effective incentive and restraint of economic behavior of executives of SOE;in addition,defense power of the management of SOE can withstand harsh industry performance to evaluate whether executives turnover constraints,however,this situation has revealed further improve the corporate governance of SOE,improve the efficiency of managers' performance appraisal system,strengthen the investment activities of the value creation of urgency and necessity of building.(3)To study the status of executives in SOE as the "economic ",and to seek the motivation of compensation changes.After the M&A,is the change of compensation whether is divorced from the evaluation and restriction of M&A performance?Select the 2006-2013 in China's two cities of Shanghai and Shenzhen A shares listed on the main board and the occurrence of M&A of SOE as the initial event study sample(due to the calculation of two-year lag,some indicators of overall sample data selection interval for 2006-2015),using OLS model and FE model,and the two stage model and Instrumental Variable method(2SLS and GMM)to ensure the conclusion of the study is robust and a variety of empirical research methods,the relationship between test performance and executive compensation of SOE M&A.The study found that,first,the better performance of M&A,executive pay higher income;secondly,with the certain M&A performance,the greater the power of the executive the pay increase dramatically;finally,executives over the job consumption is high,the sensitivity between M&A performance and executive compensation is low.The conclusion of the study from the executives of "economic"identity explained for does not have the promotion incentive and restraint of executives turnover,after the implementation of M&A to enhance the compensation motivation based on the change of compensation still difficult from assessment and performance constraints,there exists a positive sensitivity significantly;in addition,M&A,a the value creation of SOE executive compensation assessment change process,to pay performance sensitivity to the important role in restricting executive power;on the other hand,but also try to control over the job consumption for the performance for executives fled a heavy security and increase income.The possible innovations are mainly embodied in the following three aspects:(1)By means of M&A event study,a complete research framework of ex ante motivation and post assessment is established.The merger and acquisition behavior is regarded as a dynamic development process and the dual impact of the important investment and operation activities of the enterprise on the turnover of executive position and compensation changes in advance and after the event is traced.(2)Under the double principal-agent framework of SOE,the incentive and restriction mechanism of executives of SOE is studied based on the dual status of "political" and"economic".On the one hand,in the test of motivation of M&A in advance,based on the dual status of state-owned enterprise executives,the motivation of M&A is examined,which is the dual influence of merger decision on promotion motivation and compensation incentive.On the other hand,the assessment test in M&A afterwards,both the inspection of M&A influence on the performance of executive turnover,and explore the acquisition sensitivity between performance and compensation changes from the assessment test from the double perspectives of executives of SOE "political" and "economic" behavior after the completion of the merger.(3)Two-stage model is used to decompose the M&A performance.Taking into account the industry assessment in SOE,and a significant impact on the company performance in charge of industry should be considered;this paper constructs two stage model,The M&A performance of SOE is divided into two parts:the M&A performance affected by industry and the M&A performance which reflects the ability of executives.It is a new attempt to overcome the neglect of the industry performance in the method of single measure or multidimensional measure in the past.