An Empirical Study On The Impact Of Family Control On Executive Compensation

In recent years, the impact of executive pay received a lot of attention. Mostof the studies based on dispersed shareholding company model, in this kind ofcompany, the main agent of the problem is with ownership of the company ’sshareholders and has the right to operate the manager between the different interestsof the consistency problem, and executive compensation is to overcome this agencyproblem. However, in continental Europe and Southeast Asian countries, the mainmanagement model of family business. When the enterprise is family business, dueto the equity concentrated in the family stock, this kind of agency problem willweaken. While in the pursuit of private benefit of control, the family holdingshareholders and collusion to plunder small shareholder, private benefits and sharethese. In a family business, the agency problem is the manager only for familycontrolling shareholder services while ignoring small shareholders. Therefore, studyof family controlled listed companies executives compensation has certain theorysignificance and the practical significance.This paper by reviewing the relevant literature, the domestic and foreignresearch results and related basic theory were reviewed and discussed, and the use oftheoretical model analysis of family controlling shareholders of executivecompensation effect. Then, on the basis of theoretical analysis is proposed to studythe hypothesis, to develop a research model. We use2008-2010Chinese two stockmarkets family listed companies as samples,and take the CCER private database forempirical test. The ownership, the separation of cash flow rights and control rights,wnership balance degree and the ratio of independent directors and so on differentcontrol characteristics and governance characteristics on the impact of executive pay.The results show that:(1) The family ownership and executive compensationnegative correlation. This conclusion and some scholars’ research results areconsistent. This paper argues that the family has the cash flow rights limited, thefamily have incentives to uptake of personal income, and to be a part of personalincome to pay in the form of share to executives, which agreed to collusion to emptyenterprise, damage the interests of small shareholders.(2) The separation of cash flow rights and control rights on executive compensation effect.(3) Thecheck-and-balance ownership structure and executive compensation performancesensitivity is correlation, the higher the proportion of shareholding, the executivespay performance sensitivity is stronger. Other large shareholders are prompted thefamily listed companies make linked to performance on executive compensation,thus suppressing family executives and controlling shareholders collusionmotivations.(4) The proportion of independent directors and executivecompensation performance sensitivity had no significant correlation.Finally, the conclusion from the establishment of the mutual ownershipstructure, develop the reputation incentive mechanism in the manager market,perfect function of information disclosure system of the listed companies and perfectthe supervision board system four respects put forward suggestions.