Research About The Impact Of The Executive Compensation On The M & A

The M & A (Merger and Acquisition) has become an important corporate action. With the method of M & A, enterprises can seek to the concentration of capital and the rapid expansion. The M & A realizes with transferring rights based on property right system. The M & A of listed companies is an important part of the capital market system. In the meantime, it has become one of the key topics of capital market study area and corporate financial academic field. Currently, when researching the M & A of listed companies, domestic scholars often focus on the background of control power and the equity characteristics. But they often neglect the influential parties and factor of M & A events-the company executives. This paper aimed to explore the internal mechanism and empirical evidence that executive compensation exerts an influence on M & A, by the theoretical and empirical analysis.It must be noted that, the impact of the executive compensation on the M & A activity can't be directly verified by a single model, because of endogeneity. Executive compensation may be one motivation of the M & A activity, on the other hand, the compensation changes around M & A may just be the result of rigid pay system. Therefore, this paper adopts a relatively indirect method to verify the impact of the executive compensation on the M & A activity. Firstly, this paper validated the correlation between M & A activity and executive compensation. Secondly, we confirmed that executives of listed companies can increase their compensation by the M & A activity. Finally, the examination about the impact of the executive compensation on the M & A performance show me that executives of listed companies implement value destructive M & A for the increase of their compensation. These form a complete logical chain, and validated the impact of the executive compensation on the M & A activity by precondition, indirect evidence and negative evidence.This paper is divided into six chapters, each chapter follows: Chapter 1 ExordiumThis chapter first introduces the background and significance of this paper, followed the ideas and framework of research are described. Part of the research ideas, the M & A of listed companies is divided into two dimensions of research-M & A activity and M & A performance, in order to study the influences respectively. Also, due to the use of indirect evidence, the ideas and framework of research are not easy to understand. This chapter use the method of elaborates and detailed technology roadmap to make it clearer.Chapter 2 Literature ReviewThis chapter first reviews the literature both foreign and domestic about "the impact of the executive compensation on the M & A". Foreign scholars on this issue make an empirical test, but concluded not entirely consistent. Some literature shows, the executive compensation of and M & A performance has a significant positive correlation. However, most of literatures suggest that, there is a positive correlation between executive compensation and the M & A activity, but the correlation between executive compensation and merger performance is not high, for some time even showed some negative correlation. Domestic researches are less, the only literature have not concerned about the impact of executive Long-term Motivation System on M & A. At the same time, this chapter focuses on the "M & A Driven Theory" and the "M & A Performance Evaluation Method." At the "M & A driven theory" section, foreign scholars try to explain the causes of M & A. They proposed "Synergy Effect Theory", "Agency Theory", "Hubris and Overconfidence Theory", "Stock Market Driven Theory" and "Tunneling Theory". At the "M & A Performance Evaluation" section, scholars mainly use the "Event Studies", "Financial Index Method", "Executive Interviewing Method" and "Case Study", to evaluate the M & A performance, and they accordingly made a number of empirical evidences.Chapter 3 Theoretical AnalysisThis chapter first defines the M & A and executive compensation, and reviews the theoretical basis that the research relies on. On the basis of need, this chapter defines the extension and intension of some important concepts, reconstructs individual concepts. Secondly, this chapter reviews the system of executive compensation and the M & A. We find that the legal decision-making system of M & A is often destroyed by the "Inner Person Control". Meanwhile, this paper found that there is a rigid pay system in state-holding enterprises. Executive salary in state-holding enterprises often has a relationship with enterprises size. Finally, this chapter analyzes the internal mechanism that executive compensation exerts an influence on M & A. This paper found that "Agency Theory" and "Risk Preference Theory" can explain the internal mechanism, but they predict the opposite empirical results.Chapter 4 Assumptions, Variables, Models and DataThis chapter first to make some assumptions about "M & A activity impact by executive compensation", "M & A activity has a promotion effect of executive compensation" and "M & A performance impact by executive compensation". Secondly, this chapter sets the experimental and control variables. Then, in order to test the hypothesis, this chapter constructs the research models. Finally, this chapter describes the sample and data that empirical research using.Chapter 5 Empirical ResultsThis chapter first to make an empirical test about "M & A activity has a promotion effect of executive salary". This paper finds that M & A activity of listed companies can significantly improve the salaries and control benefits of executive. Secondly, this chapter makes an empirical test about. "M & A performance impact by executive compensation", finds that "Substantially improving of executive salary will result in reduced performance of the M & A", "Control benefits of executive have no significant effect on the M & A Performance" and "Substantially improving of long-term incentive will lead to higher M & A performance". Considering the results of two tests, this paper confirmed that the impact of the executive compensation on the M & A is an objective reality.Chapter 6 Conclusions, Policy Recommendations and Ideas for ImprovementFirstly, based on theoretical analysis and empirical results, the chapter reached the final conclusions of this paper. Secondly, based on the final conclusion of this paper, this chapter makes the policy recommendations as follow:①Executive long-term incentive mechanism should be strengthened.②The operating performance appraisal system should be adjusted.③M & A decision-making accountability mechanisms should be strengthened. Finally, the chapter made ideas for further improvements of this paper.The main contributions of this paper are:(1)The research content has a relatively forward-looking. M & A research field in China, researchers rarely study from the perspective of the correlation between executive compensation and M & A. This paper aimed to explore the internal mechanism and empirical evidence that executive compensation exerts an influence on M & A. This makes the research content have a relatively forward-looking.(2) The research methods are relatively innovative. On the basis of need, this paper reconstructs individual concepts, divides the executive compensation into "the scale sensitivity compensation" and "the value sensitivity compensation". On the basis of concept Reconstruction, the empirical research of this paper contains the concept of "Managerial Ownership Income" and "Executive Compensation Structure", designs multiple regression models, and improves measurement methods. This makes the research methods have a relatively innovativeness.