An Empirical Study Of Effect Of Executive Compensation Incentives On Investment Efficiency Of Tourism Listed Companies

Since the early1990s, there has been the existence of the "efficiencyparadox" that strong financing efficiency and poor "investment efficiency"coexist in China’s capital market. As motivation of company’s growth and animportant foundation of the future cash flow growth, the level of investmentefficiency will not only affect the performance of listed tourism companies,but also have a decisive role in the sustained and healthy development of thewhole tourism industry of China in the post-financial crisis era. In the processof continuous improvement of the corporate system， the executivecompensation has always been of great concern of academics and business.When the executive compensation incentives break down, managers oftendamage the firms to pursue the maximum of their own interests, and their badbehaviors in the capital investment will lead to performance of non-efficiency.In this context, the research on effect of executive compensation incentives oninvestment efficiency of tourism listed companies will have highly theoreticaland practical value.The article mainly analyzes the basic characteristics, investment efficiencyof tourism listed companies and the effect of executive compensationincentives on investment efficiency of tourism listed companies. We use dataof fifteen tourism listed companies from2002to2010as research basis andthe methods of normative analysis and empirical research, put forward thehypothesis concerning the relationship between executive compensationincentives and investment efficiency of listed tourism companies throughliterature review and theoretical analysis, build listed tourism companies’cap-ital investment model by the Richardson (2006) expected investment model,and study the investment efficiency of tourism listed companies and the effectof executive compensation incentives on investment efficiency of tourismlisted companies by regression. Finally we get several results. Firstly, tourism listed companies have six basic characteristics of smaller number ofcompanies, imbalanced geographical distribution, the poor operatingperformance, the good overall earnings qualiy with obvious individualdifferentiation, the lower total market value with obvious individualdifferentiation, and the small ages. Secondly, fifteen tourism listed companieshave under-investment on the whole from2003to2010, and seven ones haveunder-investment, eight ones have over-investment. Thirdly, when theperformance sensitivity of executive pay is larger than the optimal level ofincetives, there is the positive relation between performance sensitivity ofexecutive pay of tourism listed companies and under-investment; when theperformance sensitivity of executive pay is lower than the optimal level ofincetives, there is the negative relation between performance sensitivity ofexecutive pay of tourism listed companies and under-investment. We deepenthe study of tourism listed companies’ investment efficiency and provide animportant basis for improving investment efficiency from the view ofexecutive compensation incentives.