Research On The Relationship Between Executive Compensation Levels And Over-investment In Listed Companies

In recent years, the rising of executive compensation of listed companies in our country is at a staggering rate, in contrast, the growth of enterprise performance is slow, even negative for some enterprises. This phenomenon caused wide attention of academia, however, after a large number of theoretical and empirical researches, the "mystery of executive compensation" is still inconclusive. Considering the fact that executive compensation effect enterprise performance through "middle bridge", domestic and foreign scholars have conducted a large number of theoretical and empirical researches, but mostly unilateral "single-multiple" influence, researches on relationship between executive compensation and over-investment are rare. Therefore, in this article, the relationship between executive compensation and over-investment was analyzed through theoretical and empirical research.In the study of this relationship, firstly over-investment was set as the dependent variable and executive pay level as independent variable, then lagged executive pay level as the dependent variable and over-investment as independent variable. First, based on the background of the pay system introduction, provide theoretical basis for research on the relationship between executive compensation and company over-investment based on principal-agent, asymmetric information and corporate investment, and corporate incentive and private benefits and private costs management theory. Secondly, analyzed the mechanism of the relationship between the executive pay level and corporate investment by sorting out their current situation. Finally, empirical analysis of6816samples of1704listed companies in2010-2013was conducted by constructing four mathematical models.The empirical results show that there is significant negative coiTelation between executive compensation level and corporate over-investment, indicating that when pay level cannot compensate the efforts for the their work, managers will maximize the investment of resources, to consolidate their status and rights, in order to compensate salary gap. excessive investment behavior can increase the manager’s future monetary compensation, so. when the pay level is low, over-investment is always a good tool for the managers to get increased future earnings. Considering the above results, on the macro-level, the market of managers should be improved and external oversight be strengthened; on micro level, salary setting mechanisms should be improved, the independence of salary committee be established, scientific investment decisions should be made and the integrity, accuracy of information disclosure should be enhanced.