An Empirical Study Of Executive Pay And Bank Operating Results

Since the economic reform, especially since China joined the World TradeOrganization, and foreign banks began to enter the Chinese market, China’s bankingindustry faces competition not only come from domestic banks, but also foreign banks.Managers of bank as the decision-maker play a vital role in the bank development,soresearch the relation between the salary of managers of bank and operation performancehas far-reaching significance.How to create an efficient system of executive pay to retain good executives, hasalways been the issue of bank to explore.2013China Banking Regulatory Commissionofficial release "Commercial Bank Corporate Governance Guidelines", saying that ifcommercial banks’ asset quality or profitability deteriorated significantly, did not meetthe regulatory requirements of regulatory indicators, or other significant risks arise, willbe strictly limited to executives performance evaluation and pay. With the introduction ofthese salary limit orders, we need to study the salaries of executives play what differenceto the results of operations of the bank, and whether there has difference with otherresearch before.According to the latest annual data of banks, we analysis the situation in the2010-2012years of12commercial bank about executives pay and bank performance.The results showed that the level of correlation between the pay of executives andbanks operating performance is not significant, which means the bank’s performance isno longer rely on this cash incentive support. Joint-stock commercial bank executivespay and state-owned banks executives pay has large gap. These problems remind us toaccelerate the transformation of bank executives incentive system, to creat a morerational and efficient compensation system, so in the end of this article we also givesadvice and guidance of the policies.