Research On Top Managers’Pay Performance Sensitivity Based On The Perspective Of Risk

Top managers play an important role in the enterprise development. Effective compensation incentive of top managers can reduce agency cost, improve enterprise performance, and have an important impact on enterprise development. Since financial crisis in 2008, global economic growth is lacking motivation and domestic economy is fluctuated. In the context of this recent economy, the development of domestic enterprises, affected by the lack of demand and export, financial market volatility, the real estate bubble and other factors, faces an increasingly severe and complex environment. Thus, enterprise risk is increasing. Given this fact, it is of great theoretical and practical importance to study the influence of risks on the executive compensation incentive system. This study not only expands the practical application scope of the principal-agent theory in our country, but also has important guidance to enterprises in our country in the following aspects, such as identifying risks in the complex environment and adjusting corporate governance strategy according to the status of risks.First of all, this paper combines with the principal agent theory and the existing related research of scholars about the executive compensation, corporate performance, and enterprise risk, which is the theoretical source and the logical starting point of the article. Combined with the domestic enterprise management reality, we put forward the research hypothesis of this paper. In the empirical test part, this paper chooses panel data of 1141 a-share listed companies in China from 2010 to 2014 as the research sample. Thinking about the number of cross section far more than number of time points and the damage degrees of freedom because of too many parameters, this article selectes fixed effect variable intercept panel data model for empirical test. In empirical test of the full sample, the article conducts an empirical analysis respectively with total corporate profits and ROE as indicators of corporate performance, and then optimizes the evaluation model according to the model of goodness of fit and risk adjustment effect, finally, the article chooses enterprise profit as enterprise performance measurement indexes in order to ensure the validity and accuracy of sub-sample analysis which is classified by the enterprise size, the nature of enterprise, the enterprise growth points sample inspection. Study results are as follows:Top managers’ compensation and corporate performance are significantly positive correlation; Risks have significant negative effects on top managers’ pay performance sensitivity; Compared with large enterprises, the risk plays a greater negative influence on top managers’ pay-performance sensitivity of small-scale corporates; Compared with the state-owned enterprises, the risk plays a greater negative influence on top managers’ pay-performance sensitivity of non state-owned corporates. Compared with low growth enterprises, the risk plays a greater negative influence on top managers’ pay-performance sensitivity of high growth corporates.At last, according to the research conclusion, the article provides some recommendations as follows:When enterprises design executive compensation system, risk factors should be considered. Small-scale enterprises should improve the executive compensation incentive intensity and prevent enterprise risk which is caused by top managers’ blind pursuit for high performance. When enterprises face the risk, state-owned enterprise executive pay performance sensitivity is higher than private enterprises, and state-owned enterprises pay affected more by the enterprise performance, so we should correct public opinion direction, make people better understand state-owned enterprise executive compensation system. In modern times, the government is encouraging people to start their own businesses and to make innovations, and more and more high growth companies have occurred, the article test results show that high growth enterprise executives can implement strong salary incentive.