The Empirical Study Of Correlation Between Top-Managers' Pay Performance Sensitivity And Future Performance

The research of top- managers' incentives has aroused general interest both in theory and practice circles.Along with in-depth study,it is clearer for people to recognize that pay incentives based performance to senior manager plays very significant role.There are two research methods in this field.One method is to study how performance influences the pay of executives.The other research method is to study the relation between pay performance sensitivity and the future performance.Because relatively few scholars involved in the second study,this paper starts from this perspective,the main research is about the influence of pay performance sensitivity on future performance and future risk, as well as under different corporate nature.We want to give some useful suggestion through our research.We firstly introduce the background and meaning of this paper and explain the research scope as well as method.Then we present the papers of both home and abroad in this area.In the following part,we define the pay performance sensitivity and future performance,give the research assumption and regression equation.This paper uses 666 companies' data from Shanghai and Shenzhen Stock Exchange and analysis the relation between pay performance sensitivity and future performance.The empirical result shows that pay performance sensitivity has a negative effect on future performance.The further study on the relationship between pay performance sensitivity and future risk adds to prove our assumption.We also find that the correlation in the state-owned enterprises is lower than that in the no-state enterprises.In addition,We examine the robustness by eliminate the influence of the New Accounting Standard and reform of the shareholder structure in the following study,as well as uses ROA instead of ROE.The result is also in keeping with our expectation.At last,this paper gives our suggestion for top- managers' incentives of the listed companies of China,namely the pay-for-performance is a double-edged sword.Besides of incentive effect,it also can bring risk-averse effect to top-managers.