Excess Cash Flow,Agency Costs And Executive Compensation

In the studies on the influence factors of executive compensation, most basically discuss the factors of companies'external characteristics and the accounting income indicators, without considering the agency costs in the role of executive compensation. From the definition, the agency costs should be classified as another measure of corporate performance indicators. This paper will study the association between executive compensation with the agency costs (including inefficient investment and job consumption) from the excess cash flow. A large number of studies have shown that the free cash flow agency costs exist in most Chinese listed companies. Many scholars have discussed the relationship between cash flow and inefficient investment from theory, not from the empirical data. This paper firstly apply the theoretical and empirical method to respectively study the relationship between excess cash flow and inefficient investment, job consumption, then study the association between executive compensation and the agency cost of excess cash flow.This paper picks up the data of 1998-2008 of listed companies of the electronics industry and public utility industry as the sample based on the results that product market competition is the important factor affecting the agency costs. The results show that (1) the excess cash flow is significantly positively related to inefficient investment and job consumption; (2) the agency costs of excess cash flow affect the executive compensation.