Research On Executive Pay Performance Sensitivity Structure Of Chinese State-owned Listed Companies

Modern joint-stock enterprise separate the ownership and management, and therefore the management pay plays a very important role in the cooperate government, and the correlation between executive pay and operation performance reflects the effectiveness of an enterprise’s salary incentive system. State-owned listed companies, which are large-scale and involved in many key industries, occupy an important position in the national economy. In addition, due to the special ownership characters of state-owned enterprises such as the proprietor absence, the executive compensation issues and the correlation of salaries and performance is more important for state-owned list companies. Executive compensation of Chinese state-owned companies has always been the hot spots of the society, and the "astronomical salaries" problems of state-owned financial institutions bore the brunt of that. Thus, the government has issued regulations to limit executive pay. On August 18th,2014, the government examined the draft plan of "central corporate executive remuneration reform" and started a new round of salary limit campaign which mainly focuses on central enterprises and large financial institutions. The paper analyzed the executive pay performance sensitivity (PPS for short) of state-owned enterprises by empirical data, and structured method to analyze the compensation performance characteristics of state-owned enterprises.In this paper, theoretical analysis and empirical analysis are the main methods to do this research. Firstly, it introduces the background and significance of the topic, and indicates the research scope and methodology. Then build a theoretical framework and introduce the relevant literature and study. On this basis, the paper uses descriptive statistics method to describe the overall situation of China’s state-owned listed companies pay and performance changes and trends to show the current status of China’s state-owned listed company’s executive compensation. Based on the theoretical analysis and the overall situation description, the hypothesizes are put forward and panel data multiple regression models are built with the executive compensation as the dependent variable, and performance indicators such as net profit and EVA as an independent variable, along with a series of control variables. The sample of the models includes 2561 China’s state-owned listed companies from 2006 to 2013 (including the 1001 state-owned listed companies). By constructing the panel data regression models, this research compares the difference between the executive pay performance sensitivity of central state-owned enterprise and that of local state-owned enterprises, as well as the difference of executive pay performance sensitivity of state-owned financial institutions and state-owned non-financial institutions.The study result shows that:(1) there is a significant correlation between the executive pay and company performance of China’s state-owned listed companies, but ownership has a significant impact on the executive pay performance sensitivity (PPS for short). And the executive PPS of state-owned listed companies is evidently lower than that of non-state-owned listed companies. (2) Among state-owned listed companies, executive PPS of central state-owned companies was significantly lower than that of local state-owned companies. (3) Among the state-owned listed companies, executive pay performance sensitivity of state-owned financial enterprises was significantly lower than that of state-owned non-financial enterprises. These conclusions shows there are structural differences among the pay performance sensitivity of state-owned listed companies. When it comes to policy on executive compensation regulation of state-owned enterprises, items should also be more targeted. This study offers reference for further optimization for executive performance appraisal system in state-owned companies.