Correlation Of The Listed Company Executive Compensation Stickiness And Investment Behavior

Investment is an important way for enterprises to obtain economic benefits, which plays a decisive role in company’s operation. That’s why domestic and overseas scholars focus their studies on investment all the time. Available literatures studied in many aspects of corporate investment behavior, combining eternal market environment and internal corporate governance. The management is one party of contractual relationships, and its behavior is influenced by these relationships. When the interests between managers and shareholders are inconsistent, the managers’ investment motive will be affected by individual interests, and then investment consequences will be affected as well. To change the inconsistency, enterprise owner wants to spread operational risks between enterprise and managers effectively by compensation mechanism. When business performance increases 1 unit, the rise of executive pay level is significantly higher than the fall level of business performance decreasing 1 unit. This Characteristics is called Executive Pay Stickiness. Once the compensation mechanism exits the Executive Pay Stickiness, will the senior manager gain great interests with getting more selfish motive? And then, will it influence investment behavior? In different levels of governance and the external market environment, what difference of relationships exists between investment and Executive Pay Stickiness?This paper starts with a comprehensive overview of relevant research results, and cites 2005-2013 years of China’s Shanghai and Shenzhen A-share listed companies as samples, and synthetically uses frontier theories such as agency theory, salary contract theory, two-factor theory and investment theory, etc, and combines normative analysis and empirical methods, and research questions hereinbefore. We study the mechanism of executive compensation sticky features act on corporate investment behavior, with internal corporate governance and external market environment, which were combined to investigate its impact on the relationship between executive compensation sticky features and corporate investment.It turns out that the higher Executive Pay Stickiness level, the stronger the manager’s motivation by risky investment in order to gain more private benefits, which means there was a positive correlation between investment and investment and Executive Pay Stickiness. What’s more, considering the level of governance, we find that compared to the enterprise with high governance level, the positive correlation hereinabove is stronger in the enterprise with low level governance. And considering external market competition, we found that the less fierce external competition, the stronger the correlation hereinabove. Finally, as to the problem found in the research process, we propose the following suggestions: first, enhance the compensation assessment, regulate compensation mechanism, and reduce the compensation steerability; in the second place, establish sound governance mechanism, strengthen supervision of the manager, reduce management’s self-interest motives, and standardize manager’s investment motive; third, promote effective market competition, increase manager’s private cost of self-interest with the competition, and regulate the manager’s investment motive.