A Study Of Executive Compensation And Corporate Performance Of Realty List Companies Based On The Managerial Enterenchmance

The problems of listed companies’ executive compensation has always been the focus of attention in China, the contact between generous salary of management and the enterprise performance is not symmetrical. In addition, the reform of property right led to the separation of ownership and control, followed by the principal-agent problem between owners and operators, and principal-agent problems became a hot spot in academic at that time. But in recent years, in the field of executive compensation research, the focus of the study gradually turns from the optimal contract theory to management power theory. The existing studies have shown that in order to maintain their benefit to maximize, the operators’ behavior affected enterprise compensation mechanism and compensation performance sensitivity, however, there is no consensus yet. Especially since 2010, our government issued a series of real estate regulation policy,caused a huge shock among real estate listed companies. In such a background, the correlation between executive compensation and corporate performance just like a heavy mist.This paper based on real estate listed companies in the a-share listed, and selected 512 samples from 128 listed real estate companies from 2010 to2013. Firstly, this paper examined the correlation of high management compensation and managerial entrenchment of the real estate listed companies. Secondly, based on the managerial entrenchment, studied the correlation of high management compensation and corporate performance of listed companies. The corporate performance sticky finally. Through the statistical analysis, correlation analysis and regression analysis, we found that:(1) the correlation of high management compensation and managerial entrenchment of the real estate listed companies is significant at the 5% level. It shows that there is a entrenchment effect in real estate companies in our country, that is in order to achieve the maximization of self-benefit, executives will affect business investment decisions and compensation design with their power.(2) The enterprise executive pay performance sensitivity is not significant, when it’s managerial entrenchment is strong, in other side, when it’s managerial entrenchment is weak,the enterprise executive pay performance sensitivity is significant, that means in our country, managerial entrenchment has effect on the significant of executive pay performance sensitivity.(3)In state-owned real estate listed companies, executive pay performance sensitivity is weak, while it is strong in non-state-owned listed companies. It tells us that, the corporate governance of state-owned real estate listed companies should be improved, compensation design should conform to the companies benefit and personnel should be marketized.(4) Executive compensation of real estate listed companies is sticky in our country, in addition, is significantly sticky, when managerial entrenchment is strong; it is well known that executive compensation will not significantly sticky,when managerial entrenchment is weak. It means the stronger managerial entrenchment, the stickier executive compensation will be. It also means that executive will maintain their own benefits, even the performance of their companies is decline.This paper suggest that, in the view of the executive compensation will affect the compensation performance sensitivity and compensation sticky, real estate listed companies should strengthen corporate governance, clear power relation and optimize compensation incentive mechanism. Especially under the national regulation policy, this companies must strengthen the risk-prevention sense, reduce the cost of executive compensation.