Executives Of Listed Companies Pay Incentives, Equity Incentives And Company Performance Relationship

For a long time, how to effectively motivate senior executives has been a concern of researchers and shareholders. Due to the principal-agent problem along with the rise of joint-stock company, motivating executives has been paid more attention to and the types of incentives have been developed significantly. Executive incentive practice in China's market started late, but in recent years as improvement of corporate governance and capital market, income from incentive plan of executives has been raised tremendously.In research field, the domestic researchers have completed a series of preliminary studies about the executive remuneration incentives, equity incentives and firm performance, and obtained useful results. However, because each of these studies may has some deficiencies in data selection, sample selection, or statistical methods, the research could still be improved. Meanwhile, there are many segments of research can be derived from this topic, which previous researches didn't cover.In view of this, this paper analyzes the data of listed companies in China which obtained from Wind financial database, uses descriptive statistics, independent sample T-test, multiple regression analysis, and focuses on four issues:(1) whether there is significant difference in performance between companies whose executives holds equity with companies whose executives don't have equity; (2) whether executive remuneration incentives and equity incentives are positively correlated with the performance; (3) whether executive remuneration incentives and equity incentives are non-linear correlated with the performance; (4) whether there is difference in effect between different equity incentive types.This paper finds that:(1) the level of incentive continued to increase in the past few years, but was still at low level compared to developed markets; (2) there is obvious disconnection between change of remuneration and performance; (3) companies whose executives holds equity performed better than companies whose executives don't have equity; (4) executive remuneration incentives and equity incentives are positively correlated with the performance; (5) there might be a "U-type" relationship between executive remuneration incentives, equity incentives and performance; (6) companies which implemented equity incentive plan significantly improved their performance, the effect of restricted stock is significant, and the effect of option incentive is not significant. This paper argues that, because levels of incentives are still low, so further raising the levels of pay and ownership can motivate executives to work diligently to achieve a sustained improvement in performance. Meanwhile, the enhancement of incentives must be constantly associated with improvement of the corporate governance mechanism, information disclosure, market efficiency, manager market establishment, legal environment and strengthen of the long-term performance-oriented incentives plans.