The Empirical Study Of Senior-manager Compensation And Firm Performance In Listed Companies

Based on the system engineering theory, this paper study the influence of executive compensation on performance of China listed company and put forward policy suggestions based on the research results. Based on the system engineering theory, I treat the whole enterprise as a system, the process from salaries to corporate performance can be divided into two phases, one is the process of determining executive compensation, and the other is process of the influence of executive compensation on corporate performance. To study the process of determining executive compensation, this paper creatively consider the combined influence of the level of executive control and coordination needs on executive compensation, consider that executive compensation is the result of the game of two forces; To study the influence of executive compensation on corporate performance, this paper consider the influence of the absolute level and relative level compensation on corporate performance. Using 1290 samples of 2007-2009 Shanghai and Shenzhen stock market, totally 3870 records, I build 8 panel data regression models to validate the 6 assumptions. At present, major domestic researches on executive compensation and company performance use cross-section data, and using panel data model raises the effectiveness of the result.Finally, we get the following conclusions: Firstly, the level of executive control and coordination needs and the level of executive salary have a significantly positive correlation; Secondly, the level of executive control and coordination of demand and executive salary gap have a significantly positive correlation. Then we can see that company salary is determined more than by the coordination of operational requirements, and based on the control of senior management. With empirical research I get the following conclusions for the executive salary and corporate performance’s relationship: First, the level of executive salary and corporate performance have a significantly positive correlation, with the increase of the level of executive compensation, the corporate performance will be improved; Secondly, the executive salary gap has a significantly positive correlation with corporate performance, the expansion of executive salary gap can contribute to the improvement of enterprise performance. Then we can see that executive salary has a significant impact on corporate performance; reasonable executive compensation policy development can bring improvement to enterprise performance. Conclusions of this study can be a good guide for the listed companies in China about compensation management, it demonstrates that when executives have big power, executives can actually use the power to control his salary. What’s more, the use of incentive pay as a means of senior management should not be limited to the level of executive salary; we should pay attention to the executive salary gap.