Research About Nature Of Actual Controller Has An Impact On Effectiveness Of Executive Compensation Contract

In recent years, with the development of capital market, the phenomenon that some companies’ executive compensation doesn’t match their corporate performance is more and more caused for concern by public. Therefore, the question is shown in front of public again that whether executive compensation contract can improve corporate performance.The researches of executive compensation contract used to be limited in dominant compensation methods such as monetary remuneration and ownership incentives. But people neglect that recessive compensation is also an important part of executive compensation. Furthermore, the incentive effect of compensation contract is subject to internal and external factors of corporate after formulated. Previous researches were focus on size of companies, company growth, industries, regions and etc. But they might neglect the field that nature of company actual controller has impact to effectiveness of executive salary contract.This paper is mainly around the following issues:First, investigate whether executive compensation contract (include both dominant and recessive compensation contract) can effectively stimulate executive officers to improve corporate performance. In other words, is executive compensation contract effective or not? Second, investigate the phenomenon that nature of actual controller has an impact on effectiveness of executive compensation contract.In other words:does government as actual company controller have an impact on the incentive effectiveness of executive compensation contract? Do central government and local government as companies’actual controllers affect effectiveness of executive compensation?In order to solve the problems above, this paper (except the first chapter-introduction) mainly include following parts:Chapter two:Literature review. It mainly reviews the relevant domestic and foreign researches. Chapter three:theoretical foundation and institution background. Theoretical foundation part main includes principal-agent theory, incentive theory, human capital theory and etc. Institution background main include China’s SOE reform and compensation regulation, China’s fiscal decentralization system and the state-owned assets classification management system.Chapter four:analysis of the current status of executive compensation incentive, observe existing disparity from executives’monetary remuneration, shareholdings, on-the-job consumption and corporate performance aspect.Chapter five:research design. It was based on previous theoretical analysis and literature review to propose research assumption, did samples selection and variable definition and built relevant testing models.Chapter six:empirical research. It includes descriptive statistics, regression analysis results and model tests.Chapter seven:conclusion and recommendation of research. It includes summary of research conclusion, research revelation, innovation and shortage of this paper.Through theoretical Analysis and Empirical test, the paper reached the following conclusions:First, monetary compensation contract has incentive effectiveness, but effectiveness of executive shareholding incentive has got empirical support only in non-government-controlled companies.Second, executive recessive compensation contract has incentive effectiveness, in other words, executive recessive compensation contract can enhance corporate performance.Third, effectiveness of executive dominant compensation contract of non-government-controlled companies is obviously superior to government-controlled companies’, but recessive compensation contract is not as good as government-controlled companies’.Last, effectiveness of executive monetary compensation contract of central government-controlled companies is obviously superior to local government-controlled companies’, their effectiveness of recessive compensation contract is inferior to local government-controlled companies’. Shareholding incentive does not have significant difference among both types of companies. Incentive effect is not obvious.The investigation of effectiveness of executive recessive compensation contract in this paper can help public to change negative impression of on-the-job consumption. As long as provide appropriate supervision and guidance, recessive compensation contract such as on-the-job consumption can help to improve corporate performance. Furthermore, research about nature of actual controller has an impact on effectiveness of executive compensation contract in this paper also help to provide a new view for research of executive compensation incentive. It provides some help for understanding of our government economic function.