Product Market Competition And Executive Pay Incentive

Corporate governance issues based on the separation of ownership and controlling power have attracted many long-standing researches. However, literatures from the perspective of both internal and external mechanisms are still rare. Along with the "12th five-year plan" which sets transformation of economic development mode as the overall direction of development, the Tertiary industry development has caught great attention. As the core of third industrial, the modern service industry and the status of listed companies have also been widely studied.At first, the paper gives an overall review of the theoretical achievements based on the theory of industrial organization and the corporate governance theory to find the connection between product market competition and executive pay incentive. Subsequently, this essay chooses the data of the listed companies from modern service industry and uses PCSE model to conduct the empirical study. The main conclusions of this paper are organized as follows:Executive compensation variables and corporate performance were significantly positively correlated. While in the state-owned samples, significant negatively correla tion existed between variables of the executive payment gap and corporate performan ce. It was in accordance with the payment gap behavior theory.The product market competition shows a significant positive correlation in the state-owned enterprises; while the market share and business performance of company, which owned either by the public or private, shows a significant negative correlation. On the basis of internal governance mechanisms (executive pay incentive) and external governance mechanisms (product market competition), this essay uses mediating effect test and introduces mediating variables to explore both internal and external governance mechanisms of interaction effect.According to the research, on the one hand, the main business profit margins and executive pay levels have alternative relationship, while the market share and the level of executive compensation have complementary relationship; on the other hand, the executive pay gap influence effect corporate performance completely through the product market competition variables (the main business profit margins and market share).