Research On The Impact Of Executive Excess Compensation On The Inefficient Investment

As the agent of the enterprise, executives on the enterprise investment decision-making and development has an important influence, in recent years, the executive compensation problem has aroused wide attention from all sectors of society. Managerial power hypothesis is that executive compensation contract is an important corporate governance mechanism, effective incentive mechanism to coordinate the conflict of interest between shareholders and executives, to realize the maximum of enterprise value. Managerial power hypothesis thinks that executives can use their power rent-seeking, through a variety of ways, in turn, affects the company for their own pay arrangements. Based on the optimal contract theory and executive power under the theoretical framework, using the standard and empirical research method, the combination of excess executive compensation of listed companies through study the influence of the efficiency of the enterprise investment behavior to test the effectiveness of our executive compensation contract.This dissertation contains five parts. First of all, in the introduction, mainly introduced the research background and significance, research ideas and methods, innovation and characteristics, related literature review home and abroad the influencing factors of executive compensation and non efficiency of investment and economic consequences of excess executive compensation. The second part is the related theories, the definition of relevant concepts in this paper; the principal agent theory; contract theory, compensation management power theory and tournament theory are expounded. The third part is theoretical analysis and hypothesis, this part firstly reviews the system background of our country’s compensation incentive, and then describes the domestic listing Corporation executive compensation and non efficiency investment present situation, finally has analyzed the mechanism of excess executive compensation on inefficient investment behavior based on the assumptions of this article. The fourth part is empirical research, selected listing Corporation data of 2005-2014 years in Shanghai and Shenzhen two city for example, from Richardson (2006) model to measure the excess executive compensation and Core (2008) model to measure the non efficiency of investment, and based on the test of excess executive compensation effect on non efficiency investment. The fifth part is the research conclusions and policy recommendations, the study found that:(1) between the investment excessive executive compensation and non efficiency significantly negative correlation, namely the enterprise executive excess compensation is higher, more can inhibit the excessive lack of enterprise investment and improve the investment. (2) In the non-efficiency of investment enterprises, non-state owned listing Corporation excess executive compensation is high, investment of non-efficiency is improved, and this relationship in the performance of the state-owned listing Corporation is not obvious, probably because of executive pay in state-owned enterprises under the salary system and the budget constraint mechanism. Overall, executive excess compensation may be more reflective of the executive ability of the size, highly paid managers in the face of business investment, more likely to be adjusted according to the business environment of the investment policy, this performance is particularly evident in the non state owned enterprises, shows that executive compensation contract theory in our country still has strong applicability.