A Study On The Impact Of Managerial Compensation System On The Performance Of State-owned Assets

State-owned assets management is one of the main duties ofMinistry of Finance. A sound compensation system in state-owned listedcompanies is the essential way and instrument for improving thecorporate governance and increasing operating efficiency of state-ownedassets. Based on the state-owned listed companies in Shanghai StockExchange, this dissertation analyzes the incentive effect of the existingcompensation system on corporate performance with the use of annualsalary and managerial ownership two variables, to see whether itimproves the operating efficiency of state-owned assets. Meanwhile thisdissertation, using private listed companies in Shanghai Stock Exchangeas reference group, discovers the weakness of the existing compensationsystem in state-owned listed companies and proposes some improvementprograms.Using description statistic analysis and regression model analysis, theresearch in this dissertation mainly focuses on compensation system fortop managers in state-owned listed companies. The empirical analysisresults proves the hypothesis that annual basic salary has not impact oncorporate performance. In comparison with private listed companies, the study confirms that the new equity incentive system in state-owned listedcompanies does not play a role which it should do. It’s probably becausethe problems in stock market after reform of non-tradable shares totradable shares, and also can be caused by some internal deficiencies inthe system of state-owned listed companies, such as imperfect corporategovernance or considering more on seniority rather than ability. Anothermain point in this dissertation is the research on behavior of managerialshareholding. Adverse shareholding behavior, that is “cash out” whichhas held much concern currently, may cause the loss of state-ownedassets, and on the other hand it could make equity incentive system lostits incentive effects and hinder the further development of the company.This dissertation analyzes the correlation between behavior of managerialshareholding and various factors based on corporate performance andgovernance, draws a conclusion that corporate governance in state-ownedlisted companies has significant effect on behavior of managerialshareholding.Based on empirical analysis, the dissertation proposes someappropriate policy recommendations. Our government should improvesome related laws and regulations, build up standard and feasiblecompensation system. On the other hand, a competitive labor market formanagers should be established and lifelong tenure in disguise forexecutives in state-owned companies must be abolished. Within the state-owned companies, it is also important to complete corporategovernance and make Remuneration Committee useful. Last, developingmature and stable capital markets, so that stock prices will accuratelyreflect the companies’ operating efficiency.