A Study Of The Effect Of Top Management Team Compensation Incentive On Ineffecient Investment Activities In Listed Companies

Executive compensation incentive has been a popular and controversial topic. Of which, the researches in the recent years have focused on the relationship between executive compensation incentive and the firm performance. Based on the former researches, the author employs executive compensation incentive in the field of investment efficiency management to probe into the effect of executive compensation incentive on inefficient investment activities so as to supply theoretical basis for inefficient investment management. With the development of economics, there are problems of blind investment, seriously idled funds and so on in Chinese listed companies. These problems are directly related to the executives'investment policies. Thus, it is of great significance to study the effect of executive compensation incentive on inefficient investment activities.This thesis based on the latest researches on executive compensation incentive and inefficient investment activities home and abroad, applies management, corporate governance theory, incentive theory, and investment theory to analyze the current executive compensation incentive and inefficient investment activities in listed companies. With the methodology of document study, theoretical demonstration, statistical data analysis and so on the thesis studies the listed companies of Shenzhen and Shanghai from the year of 2006 to 2008 and proves the correlation between the executive compensation incentive and investment activities. The thesis further proves that there is positive correlation between the intensity of executive compensation incentive, namely PPS, and under-investment as well as negative correlation between PPS and over-investment. This thesis supplies a new way for inefficient investment activities management in Chinese listed companies.