An Empirical Research On Abnormal Executive Compensation And Corporate Performance

In the modern enterprise management mode, due to the separation of enterprise management and ownership, shareholders’ purpose is different from the executives’.In Managerial Entrenchment theory, based on asymmetric information and moral hazard assumptions, when the shareholders have difficulties in supervising the executives, executives have the ability and willingness to exert their influence on the board of directors’ and the remuneration committee’decision making, maximize their own interest and obtain compensation contract terms to their advantage even when the company’s performance is decline, executives’ compensation doesn’t come down and sometimes goes up. Based on the previous research, abnormal executive compensation exits in some companies and industries.Based on the former research method, through data analysis collected in 803 Chinese a share listed companies, the purpose of this article is to display the existence of abnormal executive compensation and the distribution in each industry as well as to study the relationship between managerial power, corporate governance and abnormal executive compensation.Through empirical study, we found that, from 2009 to 2013,abnormal executive compensation exits in all the industries and the average ratio is nearly 22%, in which the information technology industry has the highest level. Through regression analysis, we draw the conclusions as below. Managerial power is positively related to abnormal executive compensation. CEO-duality, equity balance degree, character of the top one shareholder are positively related to abnormal executive compensation, not significantly. The top one shareholder’s shareholding is negatively related to abnormal executive compensation, not significantly. The board size is positively related to abnormal executive compensation. The size of the board of supervisors is negatively related to abnormal executive compensation. The independent director proportion is negatively related to abnormal executive compensation, not significantly.