Executive Compensation Equity And Corporate Value Research Based On Related Party Transactions

Executive Compensation incentive compensation has always been considered animportant corporate governance mechanism to solve the agency problem, people alsomore concerned about the issue of fairness in corporate compensation contract. Thispaper attempts to study on the issue of executives’ compensation equity of listedcompanies in China, the main concern include:(1) executives’ compensation equityimpact on performance in the controlling shareholders of companies? Specifically:control rights whether and how to influence executive compensation equity, executivecompensation is fair and whether to improve corporate performance?(2) therelationship and economic consequences of the executive compensation inequity andabnormal related party transactions behavior?Firstly, the existing literature at home and abroad were reviewed, followed byincomplete property rights theory, incomplete contract theory, the principal-agencytheory and management theory of power, the basic related theory were introduced, andthen combined with our special system of background and practical, we proposed abase two-tier principal-agency analysis model between small shareholders,controlling shareholders and executives. Based on this model, we researched withtheoretical expectations and empirical testing between executive compensation equity,related party transactions and corporate value. The empirical results show that:(1) theexecutive compensation inequity is exist in the controlling shareholders’ company;(2)executive compensation inequity will affect corporate performance;(3) executivecompensation inequity impact on abnormal related party transactions behavior and isa motivation for the interests of the trenches;(4) executive compensation inequity andabnormal related party transaction behaviors affect corporate value, discretionaryaccruals has a negative value effect, nondiscretionary accruals has a positive valueeffect. Innovation and contribution of this paper is that identified the inequity andabnormal related party transactions, found the relationship that previous research andempirical testing has not been enough concern, provided relevant evidence and newpolicy proposals for the formulation of executive pay and corporate governance.