Relationship Between Firm Performance And Executive Payment On The Base Of Fair Value

In practice and theatrical field, fair value has become the apple of researchers’ eyes sinceit was used to measure intangible assets firstly in the1950s.And the research has beenongoing that scholars study the application and measurement of fair value at home and abroad.The tendency tends to fair value mode is on the choice of accounting measurement models.Based on agency theory the research is about the relationship between corporate performanceand executive compensation. Reasonable mechanism for executive compensation takesresidual claims as a link which is to integrate managers’ interests and enterprises’ performance,to contact their operating skills and hard work with benefits. Then managers’ achievement andeffort could be evaluated effectively. Besides, the mechanism is used to constraint, incentivemanagers’ behavior, reduce the cost of agency and business risks. Contracts of executivepayment, in touch with firm performance, were born for the purpose of controlling agencycost. While enterprises’ performance were influenced by fair value changes which belongs tothe loss and profit in current period, senior management could change companies’performance by using fair value or seek profit. Therefore, fair value measurement should notbe ignored considering the relation of executive compensation and performance.This thesis begins with executive pay that is affected by the application of fair valuemeasurement, discusses mutual contact of executives pay and company performance on bothsides. And then, it shows the necessity and significance to research relationship betweenexecutives pay and performance of company in the background of financial crisis andaccounting standards is on its international convergence way. At first, this article introducessome related theories of company performance and executives pay in mode of fair value athome and abroad. After that, it describes the development of executive payment according tothe data, which is about senior management’s pay from listed company in the year of2010and2011besides financial data of agricultural listed company from2006to2010. Status offirm performance was also been described. Next, the paper selects listed company’s annualreport financial data as sample in agriculture, forestry, animal husbandry and fishery industry whose executive compensation falls behind in rank, tests the existence of corporateperformance and executive pay’s relation by structure equation model. According to the pastexperience and second-order factor analysis’ research，two multivariate regression model werebuilt to study and compare if there is a correlation between firm performance which differentindexes are used to measure and executive compensation.Empirical research shows that: to verify the relationship and to fit performance metrics,systems structural equation model are effective; meanwhile, there is a positive significantcorrelation between executive compensation and company performance of agricultural publiccompany by using regression model to analysis.