Executive Compensation Structure On The Influence Of The Private Listed Companies Operating Performance And Empirical Research

Since the “Open Up” Policy, private firms in our country have developedsignificantly and their contribution to the country economy is continuously increasing.Along with the capital market has been more completed and mature, there are more andmore exploration on the relationship between corporate governance and companyperformance. However, there is still only limited research focusing on private firms. Inpractice, it is necessary to build up an effective agent salary incentive system withinprivate firms to minimal the agent cost and to improve the company performancefundamentally.This article uses private firms listed on Shanghai and Shenzhen Stock Exchange(SHZ and SZZ) with A-shares issued between2008and2010as the sample. Based onthe agent theory, it analyzes the salary structure of top managers and the factors thatdecide such a salary structure. It investigates the intrinsic relationship between companyperformance and various types of incentives. It provides theoretic supports to thepractice of manager incentives which is aim to improving the efficiency of companymanagement.The first Chapter of the article is to elaborate the study background, the value inacademic filed and in real practice. It also explains the outline of the study content andmethodology and why this study is new. Chapter two is the literature review. It reviewsprevious research on this topic which includes relevant theories, such as managementincentive theory, human capital theory, transaction cost theory, agent theory, contracttheory and company performance assessment theory. The author analyzes the salarystructure of private firms and the relationship between salary and firm performance.First of all, the relevant concepts are defined. Second, the data resource and the selectioncriteria of sample are explained. Third, the sample representing the salary structure ofprivate firms was analyzed. Fourth, the author discusses that the income of private firmmanagers are dispatch significantly with their work performance. The empirical studyshows how the manager salary structure affects the company performance which isproviding a solution for building a more effective manager incentive system. In Chapterfour, a scandalized corporation performance assessment system is built. Weighted the profit margin, turnovers, debt-paying ability in both short and long term and growthpotential from the company annual reports, using the principal component analysismethod, a firm performance assessment indicator is decided. Chapter five is theempirical study part. The relationship between salary structure and companyperformance was tested statistically by the correlation analysis. A conclusion is reached.The last chapter, Chapter six, further discusses the conclusion and proposes somepractical policy suggestions in terms of the research question. Limitations of this studyand future direction are discussed as well.Private firms are an emerging power in our economy. It plays an increasinglyimportant role in today’s China. However, there are several unanswered questions abouthow to improve the management of private firms. The lack an effective corporategovernance system constrains privates firms have a sustainable development. How toresolve this problem will always be the future research direction of all our researchers.