The Impact Of Debt On The Sensitivity Of Salary Performance Of Chinese Listed Companies

The optimal compensation contract theory thinks that management s compensation tie to corporate performance can achieve minimize agency costs. Design management compensation contract is also links the compensation and corporate performance, so in theory compensation and performance should be closely related to increase or decrease amplitude. But many scholars through the empirical study found that compensation is deviate from company’s performance.Managers power theory thinks that when the management power is larger and the internal supervision mechanism lose cases, management will seek private benefits. Debt as an effective external supervision, it has the effective role in reducing the equity agency cost, but need to attach to debt will cause new problem-the agency cost between shareholders and creditors, management compensation structure also affects the size of the debt agency cost. To study the effect of debt on executive compensation performance sensitivity need to weigh the equity agency costs and debt agency cost. Management compensation structure will impact on management motivation preferences, rational creditors will through the management compensation contract to analysis behavior preference, whether management holding or not will deliver different signals which will effect debt agency cost.This paper selects listed company datas as research samples from 2009-2012, through descriptive statistical analysis, regression analysis for empirical research problems. If there is no implementation of equity incentive schemes in listed companies, debt management will not have a significant role to cash compensation performance sensitivity. If the listed companies implement equity incentive schemes, debt will reduce cash compensation performance sensitivity and equity compensation performance sensitivity. According to the size of the asset-liability ratio, debt can be divided into low, medium and high three interval analysis influence of debt on executive compensation performance sensitivity, the absolute value of cash compensation performance sensitivity is gradually reduce, and the absolute value of equity compensation performance sensitivity is increased. This study enriches the existing research, can help us understand our country listed company executive compensation decision mechanism more clear.