Relationship Of Listed Bank Executive Pay And Economic Performance

The global financial crisis triggered by the U.S. subprime mortgage failure gavethe world a tremendous shock on financial structures and negative impacts on billionpeople’s lives, while the salaries and pensions received by the two prior executives,the protagonist of this very financial crisis, totaled up to$24million dollars after theyleft Fannie Mae and Freddie Mac. Such strong contrary facts raised doubts for thepublic, are the senior executives of commercial banks who are paid with millions ofdollars, worth what they were paid for to implement the right decisions and improvethe banks’ economic performance? This article studies the relationship betweenChina’s listed commercial banks’ economic performance and the bank executives’ pay,has practical significance to the understanding of this financial issues.Collating existing research literature, combining academic research at home andabroad on the basis of this paper in our Shanghai and Shenzhen stock exchanges of16commercial banks for the study, published in the annual report from the commercialbanks, semi-annual report, etc. data as a sample through excel, stata statisticalsoftware, multiple linear regression model, the concern of China’s listed commercialbanks and bank executive pay between economic performance empirical analysis.This paper is divided into six parts. The first part is an introduction to explain thebackground and significance of this study pointed out that the contents of this paper,methods, techniques and innovative technology route point. The second part ofexecutive compensation, the economic performance of banks and other relatedconcepts are defined, as well as domestic and foreign theories are reviewed,highlighting the principal-agent theory and incentive theory representative. The thirdpart is the status quo at this stage of China’s listed banks were analyzed executive pay,currently listed commercial bank executive remuneration in the form of a single,short-term incentive-based, and no stock options will be issued in the form oflong-term incentive compensation included high tube compensation system. Thefourth part is the use of multiple regression models in-depth study of China’s listed commercial banks quantitative relationship between executive pay and bank betweeneconomic performance. The fifth part is an introduction to foreign commercial banksand characteristics executive compensation mechanism summary. The sixth part is theconclusion of this article, as well as recommendations based on the conclusions given.The empirical results show that China’s listed commercial bank executive payand shareholder earnings per share, operating income and other indicators showed asignificant positive correlation, but the size of bank assets, capital adequacy ratio, thecost-income ratio and other indicators related to the relationship does not exist, this tosome extent, reflect the current executives of banks operating decisions focused onachieving short-term goals, is not conducive to the bank’s long-term development. Itis worth noting whether they are state-controlled commercial banks have a significantimpact on executive compensation, total remuneration of senior executives is lowerthan0.879units in the non-state-owned holding in state-controlled commercial banks.According to the study concluded that the bank should establish a set of criteria forthe assessment of the economic performance of executive pay system, but by creatinglong-and short-term incentive pay systems combine to form a "common man"consciousness, to further strengthen the internal and external supervision and restraint,establish a sound effective corporate governance structure, the final should bevigorously promoted the establishment of effective executive talent market, afavorable culture and moral constraints.