The Empirical Analysis Of The Top Executive’s Compensation Incentive And The Listed Firm’s Short-term And Long-term Performance

The conflict of interest between shareholders and managers has been attached great importance to by scholars and enterprise, so a variety of theoretical research and practical exploration has never stopped. The relationship between executive compensation and corporate performance affects the survival and development of the enterprise; meanwhile, it is of great significance for professional managers training. Although a lot of research scholars do at home and abroad for executive compensation incentive, because of different factors such as research methods and data sample, there has been no consistent conclusion. This article attempts to analyze affections on short-term and long-term performance by executive compensation structure, to find out a targeted and effective measure to improve business performance from the theoretical level, thus to guide the management practice.During the research process, collect the related literature of salary incentive and corporate performance at home and abroad, classifies and summarize, to find out the current research achievements and defects in this area, at last, the breakthrough point and the research direction could be found out. Based on the principal-agent theory, demand theory, and the theory of double factors theory, the analysis of executive compensation incentive effects on enterprise performance mechanism could be made, and put forward the hypothesis of this study. In the empirical research part which is about the relationship between executive pay and the short-term performance and long-term performance, the typical financial performance indicators and market performance indicators should be selected, which could be regarded as a measure of short-term performance and long-term performance respectively, then screen independent variables and control variables which have significant correlations with enterprise performance, and build the regression model. To make a research of the current Chinese listed companies’executive pay level, structure, trends, descriptive statistics should be made which would use complete data of a-share listed companies in2006-2012. Through the regression analysis, some corresponding conclusion and analysis could be found out.The conclusions of this study include the following aspects:(1) the factors which has a positive influence on short-time performance, whose influence ranking from big to small, they are monetary compensation, enterprise scale, the executives shareholding proportion, scale of the board of directors and asset-liability ratio. The factors that have significant negative correlation with short-time performance are the size of the board of supervisors. The ability of enterprise growth, the chairman and CEO job part-time and enterprise property have no obvious relationship with short-time performance; the factors which has a positive influence on long-time performance, whose influence ranking from big to small, they are the executives shareholding proportion, monetary compensation, enterprise scale, scale of the board of directors, asset-liability ratio. The factors that have significant negative correlation with long-time performance are the size of the board of supervisors. The ability of enterprise growth, the chairman and CEO job part-time and enterprise property have no obvious relationship with long-time performance.(2) There is a significant positive correlation between the performance of listed companies and executives monetary compensation present. Comparatively speaking, short-term performance play more sensitive to monetary compensation and the long-term performance of monetary compensation sensitivity is relatively low;(3) There is a significant positive correlation between the long-term performance of listed companies and shareholding ratio. However, the short-time performance doesn’t have a significant positive correlation with shareholding ratio.After the empirical research, the following Suggestions for executive compensation incentive could be offered, in order to make the incentive more effective:(1) In order to design executive compensation incentive system, pay structure must be arranged with specific goals according to the enterprise internal and external objective environment and decision factors;(2) Improve the corporate governance mechanism and establish a corporate governance system in conformity with the characteristics of Chinese listed companies.(3) Speed up the implementation of executive hiring market mechanism;(4) Make efforts to improve the performance evaluation system;(5) Increase the transparency of the executive compensation, perfect the relevant laws and regulations, and strengthen supervision;(6) Establish the incentive mode that makes a combination of short-term incentive and long-term incentive salary;(7)Try to make penalties to keep pace with incentives;(8)Continue the construction of the capital market, which can adapt to the development of the listed company.