Research On The Influence Of Independent Directors Compensation Incentives And Enterprise Risk-taking Level

As an important means to alleviate the principal-agent problem of the company,the independent director system is a key link to improve the corporate governance structure,strengthen the internal supervision mechanism and restrain the opportunistic behavior of the management.Therefore,the independent director system has been adopted by many national securities supervision and administration departments.China formally implemented the independent director system in 2001,which requires listed companies to employ no less than one third of the board members as independent directors.In fact,there is also a principal-agent relationship between independent directors and shareholders of listed companies,and they are rational economic persons themselves.Therefore,restraint and incentive mechanism are important measures to improve the performance effect of independent directors.At present,due to relevant regulations in China,equity incentive is basically not implemented for independent directors,and monetary compensation has become the main means to motivate independent directors.Providing sufficient and appropriate monetary compensation incentive measures to independent directors can urge them to actively play their supervisory and advisory functions,improve their diligence,and enhance their willingness to express independent opinions on the board’s proposals.Therefore,in order to promote the performance of duties of independent directors and improve the performance of duties of independent directors,and to better play the governance role of supervision and consultation,we should focus on and discuss how to establish effective incentive mechanism for independent directors.Risk-taking level as a corporate financial decisions based on risk and return,this kind of risk selection is very important to enterprise and social development,the appropriate risk-taking will not only help improve the speed of economic subject capital accumulation,can also promote economic main body of technological innovation,is the root of a nation’s long-term economic growth momentum,therefore,based on the background of China’s economic transformation,It is of great significance to explore the factors that influence the level of risk taking in order to improve the efficiency and increase the value of micro enterprises and the long-term sustainable growth of macro social economy.In the research field of modern corporate finance and corporate governance,the lack of enterprise risk taking is regarded as an indirect agency cost,while the independent director system is considered as an effective way to solve the problem of manager agency by the academic and practical circles.Existing research of the independent director salary incentive is mainly on the independent director behavior,corporate performance,earnings quality and the influence of violations of listed companies,few scholars from the perspective of independent director salary incentive to study the influence of risk-taking level of the enterprise,therefore,this article from the perspective of independent director salary incentive to explore the impact on the enterprise risk-taking level,it has certain theoretical and practical significance.This paper takes Shanghai and Shenzhen A-share non-financial listed companies from2009 to 2019 as research samples,adopts unbalanced panel data,and is based on independent director efficiency theory,tournament theory and social comparison theory,etc.This paper analyzes the impact of compensation incentives for independent directors on the risk-taking level of enterprises from the perspectives of independent directors’ compensation level,internal compensation gap of independent directors and external compensation gap of independent directors,and introduces the influence of overseas background characteristics of independent directors on the relationship between compensation incentives for independent directors and enterprise risk-taking level.This paper further sorts out and discusses the internal mechanism and path of independent directors’ compensation incentive acting on enterprise risk-taking level,At the same time,it also analyzes the heterogeneity of external supervision pressure,internal checks and balances mechanism and external environment.Through theoretical analysis and empirical test,this paper finally draws the following research conclusions:(1)There is a significant positive correlation between the remuneration level of independent directors and the risk-taking level of enterprises.Independent directors with overseas background strengthen the positive correlation between the two.After distinguishing the high and low compensation mean groups,it is found that the compensation level of independent directors only improves the risk-taking level of enterprises in the sub-samples with high compensation level.In the mechanism test,it is found that the incentive of the compensation level of independent directors can promote the improvement of the risk-taking level of enterprises by improving the diligence of independent directors,alleviating the myopic degree of management,and improving the full expression effect of the investment opinions of independent directors.In further research,it is found that when the analyst attention is low,the media attention is low,and the shareholding ratio of institutional investors is low and low,there is a more significant positive correlation between the compensation level of independent directors and the risk-taking level of the enterprise,which indicates that there is a substitution effect between independent directors and external supervisors.(2)There is a positive correlation between the internal compensation gap of independent directors and the level of enterprise risk taking,and the overseas background of independent directors enhances the positive correlation between the two.In the mechanism test,it is found that the internal compensation gap of independent directors can improve the risk-taking level of enterprises by improving the diligence of independent directors,alleviating the myopia of management,and improving the full expression effect of independent directors on investment opinions.Further research found that the independent directors were divided into three groups according to the degree of internal pay gap.Only the group with the largest internal pay gap improved the risk-taking level of the enterprise,while the group with the middle internal pay gap and the internal pay gap had no significant effect compared with the group.By grouping regression according to property right nature,ownership concentration and CEO power,it is found that in private enterprises,decentralized ownership and enterprises with low CEO power,the internal compensation gap of independent directors has a more significant positive impact on risk-taking level.(3)In the sample where the average pay of independent directors is higher than the average pay of the industry,the external pay gap of independent directors can promote the risk-taking level of the enterprise,and the overseas background of independent directors enhances the positive correlation between the two.However,in the sample where the enterprise salary is lower than the average of the industry salary,the external salary gap of independent directors has no significant impact on the risk-taking level of the enterprise.In the mechanism test,it is found that in the samples higher than the industry average,the external compensation gap of independent directors can improve the risk-taking level of enterprises by improving the diligence of independent directors,alleviating the myopic degree of management,and improving the full expression effect of independent directors on investment opinions.Further research finds that the external compensation gap of independent directors,which is higher than the industry average,has a more significant effect on promoting the level of enterprise risk taking in regions with low social trust,competitive industries and enterprises with low marketization process.The main innovations of this paper are as follows: first,this paper discusses the the potential way to alleviate the independent directors agency costs,expand the independent director agency problems related theoretical research,compare internal compensation of independent directors to industry platform,from the internal pay gap compensation levels of the independent directors,independent directors and independent directors external compensation gap multidimensional perspective on its incentive effect,not only expanded the research contents of the independent director,at the same time expand the research field of vision of the pay gap.Second,this paper deeply analyzes the spillover effect of the compensation incentives of independent directors in the capital market,and finds that the compensation incentives of independent directors will have an impact on the risk-taking level of enterprises.Then it explores the influence mechanism and path analysis between the two,and carries out relevant theoretical analysis and empirical data test.Third,this paper uses the manual data collection of the independent directors overseas background characteristics,the overseas background will be independent directors of the important developing countries characteristics embedded in human resources for independent director salary incentive impact on the relationship between enterprise risk-taking level research,enrich the research achievements in the field of enterprise risk-taking level.