Research On The Influence Of Multiple Large Shareholders On Executive Compensation Contract

The separation of ownership and management of modern enterprises has produced a series of agency problems.Good corporate governance mechanisms can effectively alleviate agency conflict between shareholders and the management,improve enterprise operation efficiency and promote high-quality economic development.Among the various factors affecting corporate governance effect,ownership structure is the main determinant.The multiple large shareholders is one of the main types of ownership structure.It widely exists in companies in many countries all over the world.In China,the proportion of companies with multiple large shareholders has reached to 30%.Therefore,the corporate governance effect of multiple large shareholders has been a research focus across the world.These researches mainly discuss whether multiple large shareholders help to restrain the opportunistic behavior of large shareholders and improve the corporate value from the perspective of shareholder checks and balances.There are few studies investigated the corporate governance effect of multiple large shareholders from the perspective of management supervision and incentive.In addition,no consistent conclusion has been reached.Executive compensation contract is an institutional arrangement between shareholders and the management about management compensation incentive.A well-designed executive compensation contract can effectively alleviate the agent conflict between shareholders and the management,and enhance the value of company.However,the executive compensation contract may be manipulated by the management to grab private interests in practice.The effectiveness of executive compensation contract reflects the efficiency of corporate governance.There is few literature systematically study the impact and mechanism of multiple large shareholders on executive compensation contract.Therefore,the research on the impact of multiple large shareholders on executive compensation contract is an important research theme,which deserves deep investigations.Based on the universality of multiple large shareholders and relevant theoretical basis,this paper systematically studies the impact of multiple major shareholders on executive compensation contract.The non-financial listed companies with large shareholders in China's capital market from 2007 to 2019 are taken as the research object in this paper.Based on the relevant literature of multiple large shareholders and executive compensation contract,this paper empirically tests the impact and mechanism of multiple large shareholders on executive excess compensation,executive employee compensation gap and executive pay-forperformance sensitivity.The research findings can serve as empirical evidences for the economic consequences of multiple large shareholders,and the influencing factors of executive compensation contract.The research results enrich and expand relevant research,and have certain theoretical and practical significance.This paper mainly includes the following seven chapters:The first chapter is introduction.This chapter mainly introduces the research background and existing problems,theoretical and practical significance,core indicator,research content and structural arrangement,and the research innovations and contributions of this paper are also presented.The second chapter is about literature review.Based on the research literature at home and abroad,this paper systematically combs and summarizes the research related to multiple large shareholders and executive compensation contracts,which lays a theoretical and literature foundation for the follow-up research of this paper.On the basis of systematically summarizing the existing research results,this paper points out the shortcomings of the existing literature and proposes corresponding research opportunities.The third chapter is about theoretical analysis.This chapter first introduces the theoretical basis of this paper,i.e.,agency theory,information asymmetry theory,optimal contracting theory and managerial power theory.The impact of multiple large shareholders on executive compensation contract is analyzed from three aspects: executive excess compensation,executive employee compensation gap and executive pay-for-performance sensitivity,and then the theoretical analysis framework is structured.The forth chapter is about multiple large shareholders and executive excess compensation.This chapter studies the impact of multiple large shareholders on executive compensation from the perspective of executive excess compensation.The influence of multiple large shareholders on executive excess compensation depends on the supervision efficiency of multiple large shareholders on the management.If the coordination and cooperation among multiple large shareholders improves the supervision efficiency,multiple large shareholders will reduce the level of executive excess compensation.If the friction and conflict among multiple large shareholders reduce the supervision efficiency,multiple large shareholders will improve the level of executive excess compensation.The results show that the mutual checks and balances and friction between multiple large shareholders reduce the supervision efficiency of multiple large shareholders on the management.The management power is thus expanded,and the level of executive excess compensation is improved.The fifth chapter is about multiple large shareholders and the executive employee compensation gap.This chapter studies the impact of multiple large shareholders on executive compensation fairness from the perspective of compensation gap between executives and employees.This chapter mainly aims to investigate whether the executives of companies with multiple large shareholders will take into account the fairness of executive compensation while seizing excess compensation.The results show that compared with the company with a single large shareholder,the salary gap between executives and employees in multiple large shareholder companies is larger,and the impact of multiple large shareholders on the salary gap is more significant in private enterprises.The sixth chapter is about multiple large shareholders and executive pay-forperformance sensitivity.This chapter studies the impact of multiple large shareholders on the effectiveness of executive compensation contract from the perspective of executive pay-for-performance sensitivity.That how the company executives respond to the pressure of questioning the excess compensation and salary gap from public is examined.Will the company executives defend for their high salary and improve the pay-for-performance sensitivity under the established salary contract,or manipulate the salary contract to reduce the pay-for-performance sensitivity directly in the formulation process of salary contract? The results show that compared with the company with a single large shareholder,the executive compensation performance sensitivity of multiple large shareholder companies is lower.The seventh chapter presents the research conclusions.The main research conclusions of this paper are summarized.Policy suggestions based on the research conclusions are proposed.The shortcomings and future directions are presented too.The main innovations and contributions of this paper can be summarized as follows.Firstly,this research makes up for the lack of research on management supervision and incentive effect by multiple large shareholders,expands the relevant literature on shareholder coordination and friction,and provides empirical evidence for the agency cost caused by poor shareholder coordination.Most of the existing studies focus on the mutual supervision and balance effect of multiple large shareholders.There is few research on management supervision and incentive,which leads to a deviation in the understanding of the corporate governance effect of multiple large shareholders in China's capital market.This paper systematically discusses the mechanism and results of multiple large shareholders affecting executive compensation contract from the perspective of executive excess compensation,executive employee compensation gap and executive pay-forperformance sensitivity,respectively,which greatly enriches the research on the supervision and incentive effect of multiple large shareholders on the management.In addition,the existing literature on shareholder coordination is very limited,and there are few empirical studies to deeply explore the impact of shareholder coordination and friction on corporate decision-making and operation.This study provides new evidence for this academic field,and proves that poor shareholder coordination will reduce the efficiency of shareholder decision-making and increase the cost of the company.Secondly,this paper expands and enriches the literature on the influencing factors of executive compensation contract.Most of the existing literature studies the influencing factors of executive compensation contract from the perspectives of the management,controlling shareholders and the internal and external governance environment of the company.Few studies explore the impact of shareholder heterogeneity and the game between shareholders on executive compensation contract.Aiming at the common form of ownership structure of multiple large shareholders,this paper systematically discusses the impact and mechanism of the game between multiple large shareholders on executive compensation contract.The findings further expand and enrich the literature on executive compensation contract.Thirdly,this research provides a new idea for the exertion of the governance effect of large shareholders.It is found that when the number of other large shareholders is greater and the shareholding ratio is higher,the executive excess compensation and the salary gap between executives and employees is greater,and the sensitivity of executive compensation performance is lower.However,the appointment of chairman or CEO by shareholders to the company can significantly reduce the negative impact of multiple large shareholders on executive compensation contract.It indicates that the shareholding of large shareholders can not guarantee the exertion of their governance role and protect their shareholders' rights and interests.To ensure the shareholders' rights,it is an effective method to appoint chairman or CEO to participate in high-level governance.This paper provides a new research clue for the improvement of shareholder governance effect and the protection of shareholders' interests.Fourthly,this paper provides an empirical reference at the enterprise level to further promote the healthy development of China's capital market and achieve the goal of high-quality economic development.On the one hand,this study provides negative evidence for the corporate governance effect of multiple large shareholders from the perspective of management incentive,which provides a basis for the company and regulatory authorities to put forward targeted improvement measures,optimize the ownership structure and improve the corporate governance effect of multiple large shareholders,which is conducive to promoting the healthy development of the capital market.On the other hand,this paper finds that multiple large shareholders reduce the effectiveness of executive compensation contract,which intensifies the agency problem between shareholders and management.Today,when the economy turns to high-quality development,the research conclusions of this paper are important for dealing with the relationship between management and shareholders and further improving the supervision and incentive mechanism for executives.Thus,the research conclusions are of great significance to promote highquality economic development.