The Research On The Correlation Between The Executive Compensation And The Firm Performance Of Chinese Listed Companies

Under the situation of the challenge of knowledge economy and global integration, theexecutives play an important role in the modern enterprise development. Therefore how toreasonably construct the executive compensation incentive mechanism and improve theenterprise performance has become a highly urgent and realistic task. So the research of thispaper is significant.First of all, this article starts from the theoretical research of executive payment based onreviewed and summarized of the domestic and foreign literature, and explains the concepts andtheories of executive payment. It is necessary to make theoretical analysis of the correlationbetween executive compensation and the firm performance. Then select830a-share listedcompanies of the Shanghai and Shenzhen main board during2010to2012as samples and takemonetary compensation, share-holding rate and on-the-job consumption as the measurementindex of executive compensation and ROE, ROA, EPS as the measurement index of the firmperformance. Through the methods of descriptive statistic, correlation analysis and multipleregression analysis, we come to the conclusion that executive monetary compensation,shareholding and on-the-job consumption are significantly related to the firm performancerespectively, the factors that influence the effect of the payment incentive include the corporateproperty, the firm size, the industry factors and the first big shareholder holds. Finally we putforward the suggestions on improving the executive system. The government should increasethe transparency of information disclosure of listed companies and strengthen the externalsupervision. The enterprise should carry out the short compensation tool combined with thelong-term tool and improve the evaluation and incentive model of the executive compensation.The main innovation of this article is through collecting the latest data and building thepanel model to analyze the correlation between the executive payment and firm performancefrom the angle of monetary compensation, share-holding rate and on-the-job consumption. Onthe other hand to make deeply theoretical discussion and quantitative analysis about the mattersof the correlation between executive compensation and the lag phase firm performance, thelong-term equity incentive effect and on-the-job consumption. Hope this article can providesome empirical evidences of building and consummating the compensation mechanism ofChinese listed companies.