Empirical Study On Factors Influencing Executive Compensation Of Chinese Listed Commercial Banks

ABSTRACT:The huge sum of the compensation of executive managers in commercial banks in China is always widely questioned by society. Is the compensation too high? How to make the executive manager compensation system to better improve the operation and development of commercial bank? How to make a proper and effective compensation system which reduce the transaction cost between shareholders and managers in the bank? These questions are becoming more and more urgent and important for commercial banks and bank industry supervisions throughout the world.Since the Reform and Open-up, the financial system especially the banking system in China has been changed and implemented for several times. A market-oriented banking operation system has been set up. Nowadays, the Chinese commercial banks have been improved in terms of global impact, asset value and profit ability. The gap between Chinese and world-famous commercial banks has been narrower and narrower. However, there are still big problems in China’s banking system in terms of the integrated and risk management ability, the incentive and constraint mechanism for bank employees, especially for executive managers, has not been implemented and improved so far.In this paper, qualitative and quantitative analysis will be used to study on the compensation of executive managers in16listed commercial banks in China. The conclusion can be draw that the commercial banks has initially built the compensation framework based on salary and work performance. There is a big difference in terms of the compensation level among different banks. The short term incentive plans are widely used while the long term one is needed. The regression analysis shows that there is a close connection between the compensation level and bank operation performance.As the market oriented operation of the commercial banks has been more and more mature, it is urgent to build an integrated performance evaluation system. On one hand, the bank industry is different compared with other ones so that the bank performance evaluation should be not only related with the accounting profits and market value, but also focus on the asset security and liquidity. On the other hand, it is key to adjust compensation structure, combine the short and long term incentive plans and improve the information transparency of the executive managers.