Empirical Studies Of Executive Pay And Corporate Performance Of Listed Companies

With the development of market economy in China，the modem enterprise ownershipand the right of management have been separated．Senior management who has become animportant human capital plays an important role for the development ofenterprises.However,between owners and senior managers, there exist problems such asmoral hazard and adverse selection,because of asymmetric information or unequeltarget.And in China,the compensation incentives of senior managers,there has been manyproblems,restricting the development of enterprises.Therefore,the correlation between thesalary incentive of senior managers and company performance,the validation effectivenessof the incentive to senior managers and motivational factors have important theoretical andpractical significance to find the best incentive plan of senior managers,establish andimprove the incentive mechanism and effectively improve corporate performance.In this paper,using the method of combining normative and empirical research,firstlyit reviewed the literature of the compensation incentives of senior managers at home andabroad. Secendly it makes some theory analysis from the following aspects： theprincipal-agent theory，the compensation theory and human capital theory．And thenmade a descriptive statistical analysis on the2008-2010salary status quo of seniormanagers in China,which provide theoretical and practical basis of the empirical analysisof executive pay and company performance.On this basis, the cross-sectional data of listedcompanies in2010as a sample,takes two-way empirical analysis of executive pay andcompany performance.At the last according to the conclusions of empirical analysis tomake recommendations accordingly.With the data of1588China’s listed companies,this paper makes two-way empiricalanalysis on relationship of executive pay and corporate performance and we conclude that:①Executive pay and corporate performance is a positive correlation,and the coefficientbetween them varies with different performance indicators.Among with earnings pershare,return on assets and return on net assets,earnings per share have a higher degreeexplanation to them.②Executive pay and company size is a significant positivecorrelation.Executive compensation and the independence of the board of directors,theconcentration of the company’s ownership are negatively related torelationship.Executive pay and the proportion of managerial ownership is a significantpositive correlation,but the correlation is a little weak.In addition,executive pay is notcorrelated with the proportion of state-ownd shares.③Company performance and executive compensation are positively correlated.This shows that China’s currentincentive mechanism of executive compensation has played an important role.At the sametime,by different groups we also found that:The incentive effects of executivecompensation is different in the different size of the company. The larger the size of thecompany,the more obvious of the incentive effects of executive pay.The smaller the size ofthe company,the lower the incentive effects of executive pay.The proportion ofstate-owned shares influences the incentive effects of executive compensation,andnegatively correlated with the incentive effects of executive pay.This paper adopts two-way analysis of empirical,not only validate the correlation ofthe executive compensation system and company performance,but also analyze theeffectiveness of executive compensation.This has deepened the understanding of thecorrelation between incentive mechanism of executive compensation and companyperformance of listed companies in China and thus has a furture significance.