Empirical Research On The Correlation Of Executive Pay And Corporate Performance Of State-owned Firms

Research about executive compensation has caused the attention of the academiaincreasingly. Especially after the financial crisis, Wall Street executives’ high pay andtheir poor management caused discontent of the public. The problem of managers ofstate-owned firms has especially come to be serious, so as the compensation problemcaused global attention. The researches abroad always focus on the company listed asa whole, while few studies research the relationship between executive pay andperformance of state-owned firms in our country. However, the stated-owned firmssuch as monopoly industry in our country are the real own which have great influenceon the economy. Considering the influence on our country’s economy, this paper hasresearched the relationship between executive pay and performance of state-ownedenterprises in our country, which helps to understand and evaluate the currentsituation of executive compensation system objectively. This paper do the researchfrom the sensitivity of executive pay and corporate performance.Along with our country’s economic system reform, the relationship between thegovernment and the state-owned enterprises gradually began to change. But thereform of state-owned enterprises is not perfect, especially to the state-ownedenterprises pay system. There still has some shortcomings of this system. So, thispaper argues that the inspection in our country state-owned enterprise betweenexecutive compensation and firm performance is conducive, which means to find theproblems existing in the state-owned enterprise executive compensation system in ourcountry. As the executive compensation problem appeared in recent years has causedwide public debate, the Chinese government has taken some measures to control theexecutive’ pay of state-owned enterprises, such as the release of the limit of2009.China’s salary is one of the government regulations. But how does it effect? However,this article studies the sensitivity between executive pay and performance in thestate-owned enterprises in China. And this paper researched the differences of the paybefore and after the change, with the analysis of the effectiveness of the salary limit,hoping to give direction of the executive compensation system. It is also helpful tothe long-term development of our country’s enterprises and the system of executivecompensation. Wish it useful to build a positive image in the social public as adirectional guidance.Adopting the combination of the analysis of the theory and the empirical study,this paper first analyzed the relationship between the managers and shareholdersaccording to the principal-agent theory. And then, this paper researched the problemcaused by this relationship from the perspective of information asymmetry, whichleads to the importance of salary incentive. Next, the data of state-owned firms wereadded into the research as a variable. Finally, this paper compared the situations of therelationship after the Pay order was issued.