The Ultimate Ownership, Management Incentives And Firm Performance

The relationship between management incentives and corporation performance is the logic starting point in the field of management incentives. According to principal-agent theory, in order to avoid moral hazard and adverse selection of management, corporate owners should establish reward-performance contract with management in order to encourage and restraint their behavior. Because of this, the management have the motivation to work hard and to increase their own interests by improving the corporation performance.This paper analyzes the link between currency salary and firm performance; managerial ownership and firm performance; perquisite consumption and firm performance, in the context of state owned versus non-state owned listed firms by using statistical description analysis and hypothesis testing analysis. It draws the following conclusions. The result shows that the currency salary in non-state-owned enterprises is much more than state-owned listed companies. And corporation performance is positively correlated with currency salary, which is more significant at non-state-owned enterprises. The managerial ownership in non-state-owned enterprises is much more than state-owned listed companies. And there is a positive correlation between managerial ownership and firm performance, which is more significant at non-state-owned listed companies. The perquisite consumption in non-state-owned listed companies is much more than state-owned enterprises. And there is a negative correlation between perquisite consumption and firm performance, which is more significant at state-owned listed companies. Moreover, this paper confirms that the direction of currency salary, managerial ownership and perquisite consumption impact on firm performance are the same between state-owned and non-state-owned listed companies, but the degrees are different. Thus these findings serve as an evidence to improve the incentive mechanism in Chinese listed companies.