Influence Of Managerial Power On Incentive Effects

How to explore a suitable road for the healthy development of China’s securities market, and how to regulate the listed companies’governance mechanisms in order to meet the business goals, have aroused the concern of the government, enterprises, investors and other stakeholders. After several reforms, China’s securities market has undergone considerable development, but also exposed a lot of problems. Executive compensation is always considered as the key to solve the principal-agent problem between shareholders and manager. If the system is properly designed, it can effectively reduce the principal-agent costs, and encourage managers to spare no efforts to work, so as to improve the value of the company. In reality, companies are using various types of compensation plans to motivate executives to create more value for the company, but the actual pay incentive effect is always the opposite. In recent years, executive incentives have been a topic of concern home and abroad.The existing related researches about the managerial power on the executive compensation incentive effects focus on the state-controlled listed companies, while ignoring another important subject—the non-state-controlled listed companies. Based on the view of China’s non-state-controlled listed companies, the theoretical analysis and empirical tests are designed to explore the effect of the executive power on incentive pay, in other words, this paper mainly discusses whether managerial power is undermining the integrity of the compensation contract.This paper is divided into six chapters, each chapter follows: Chapter1ExordiumThis chapter first introduces the background and significance of this paper, the ideas and framework of research are followed. The background leads to the reality of the problems, then it elaborates the significance of the research in the field, also, due to the use of indirect evidence, the ideas and framework of research are not easy to understand. This chapter use the method of elaborates and detailed technology roadmap to make it clearer.Chapter2Literature ReviewThis chapter first reviews the literature about "the managerial power on the incentive effects of their own remuneration". These literature mainly can be divided into two parts:managerial power on the monetary remuneration and on job expense. In the early stages of the study, the majority of research focused on the former, with the diversification of the executive pay, scholars began to pay more attention to the latter.Secondly, this chapter reviews the literature about "the managerial power on the incentive effect of the pay gap" in order to illustrate the relationship between managerial power and pay gap. Finally, this chapter reviewed existing researches, pointing out the deficiencies of the existing literature in the study selection, so as to pave the way for the following study.Chapter3Theoretical AnalysisThis chapter first defines the executives, managerial power, pay incentives and non-state-controlled listed companies, and reviews the theoretical basis that the research relies on. On the basis of need, this chapter explains the theory of principal-agent, the theory of managerial power, the theory of benefits of control and the theory of pay gap.Besides, this chapter introduces the related institutional background of listed companies, especially for the pay incentives. The establishment and operation of these systems provide an institutional guarantee for salary incentives for listed companies.Chapter4Assumptions, Variables, Models and DataThis chapter first makes some assumptions about "managerial power and monetary remuneration","managerial power and job expense" and "managerial power and pay gap". Secondly, this chapter sets the experimental and control variables. Then, in order to test the hypothesis, it constructs the research models. Finally, this chapter describes the sample and data that empirical research uses.Chapter5Empirical ResultsThis chapter first makes an empirical test about "managerial power and monetary remuneration", finds that in non-state-controlled listed company, the greater the managerial power, the higher the monetary remuneration of executives; secondly, This chapter makes an empirical test about "managerial power and job expense",finds the greater the managerial power, the higher the job expense; Thirdly, This chapter makes an empirical test about "managerial power and pay gap", finds the greater the managerial power, the higher the pay gap, however, there is no significant relationship between pay gap and performance.In addition, during the empirical process, this paper also finds that "some factors can measure the managerial power except the proportion of independent directors", that is to say, the salary incentive is still on the base of monetary remuneration, and the proportion of managerial ownership is very lowIn a word, this paper considers that in the non-state-controlled listed companies, the managerial power is the key to affecting the compensation contract, in the empirical test, the chapter uses descriptive statistics, correlation and regression analysis methodsChapter6Conclusions, Policy RecommendationsFirstly, based on theoretical analysis and empirical results, the chapter reaches the final conclusions of this paper. Secondly, based on the final conclusion of this paper, this chapter makes the policy recommendations as follow:①Pay more attention to the managerial power, the construction of internal governance should be strengthened; The managerial power is closely related to corporate governance, it will be greater when corporate governance is flawed, they can exploit these flaws to improve their own salary by themselves.②Information disclosure should be strengthen. Transparent and comprehensive information disclosure is important for preventing the executive increase their job expense without authorization③Establish the pay incentive market standards. In order to Determine whether the incentives is excessive, more market standards are needed, and more standardized operation of capital markets should be the introduced in order to promote the optimization of the compensation contract④Introduce additional forms of equity incentives. More forms of equity incentives will help alleviate the conflict of interests between management and shareholders, will fully mobilize the enthusiasm of the management.The main contributions of this paper are:(1)The research further enriches the study of related issues. Most scholars merely focus on the effect of a certain type of pay incentive, that is often study about "managerial power and monetary compensation" or "executive power and job expense" separately, the study is not comprehensive enough. Therefore, this paper redefines the pay incentives, undertake extensive research from two angles, so as to fully elaborate the study(2)This paper examines the non-state-controlled listed companies, enriching the study of the existing literature of the propositions. State-owned holding enterprises and non state-owned holding enterprise are different from various aspects, such as the design of executive compensation, the degree of government regulation, corporate internal governance mechanisms and so on. Separate study on non-state-controlled listed companies can help us compare our conclusions with other scholars who study state-controlled listed companies. And thus we can identify the problems and try to address them.