A Research On The Realtionship Of The Executive Compensation And Banking Performance

In June 2006, State-owned Assets Supervision and Administration Commission of the State Council published the guidance on the executives'non-pecuniary compensation of Central government enterprises. On September 11,2007, Ministry of Human Resource and Social Security of the People'Republic of China and other departments published the paper about the guidance of further standardize the compensation of the people in charge of central enterprises. The main aim is to control non-pecuniary compensation. Non-pecuniary compensation gain attention from society, including academic field, media and ordinary people.For in-depth understanding of the condition on executives'non-pecuniary compensation of Chinese banking, this paper discover the role of non-pecuniary compensation in the executives compensation system and research whether it has a negative economic consequences. On the basis of the analysis of executives'compensation content, this paper divides executives compensation into two main parts:one part is monetary compensation of executives, including the level of monetary compensation and the gap of compensation.As the theory of equity theory, people not only pay attention to their absolute compensation,but also compare their compensation to other people. The other part is non-pecuniary compensation which is closely linked with the position of executive.In a word, this paper try to discuss the old topic from a new aspect.On the carefully review the relative literature,we select 14 Chinese bank as the research object to discuss the relationships between banking performance and the level of monetary compensation of executives, non-pecuniary compensation, compensation gap of top management team. Beside that, we also discuss whether non-pecuniary compensation has subsistent effect to monetary compensation of executives.We use the data from annual report to process statistic analysis including description analysis, correlation analysis and regression analysis. The valuable results we got were as followed:(1) Because of the banking specificity, the position of shareholders are different from other enterprises, we found the level of monetary compensation has a significant positive relationship with net profit, but does not have significant difference to shareholder value.(2) Bank is a special industry which every staff is equipped with special knowledge and needs much more collaboration and help, so compensation gap of top management team has a significant negative relationship with banking performance.(3) Non-pecuniary compensation has a significant negative relationship with bank in performance. Non-pecuniary compensation will ruin the profit of Chinese bank and Non-pecuniary compensation does not have substitutive effect to monetary compensation of executives.(4) When decide monetary compensation of executives, it well relative to profitability indicator, but has not relative to risk indicator, so we found net profit has significant positive relationship with the level of monetary compensation of executives. Non-performing loan ratio and Capital adequacy ratio do not have significant relationship with the monetary compensation of executives.(5) The level of monetary compensation and performance have already established a positive correlation in Chinese bank, namely bank the level of executive monetary compensation is decided by banking performance, and the increase of monetary compensation has a positive effect to improvement of banking performance.