A Study On Market Competition, Equity Structure And Executive Compensation Incentives

The executive compensation incentives is an important component of incentive mechanism and corporate governance structure. The effective of compensation incentives has direct impact on the agency cost and corporate performance. These facts are common issues, such as the executive compensation of listed companies increase rapidly, there exists a significant gap between industries differences, the dropping of operating performance accompanied with the stable salaries. At the same time, executive compensation chaos began to appear from years ago. Recently, the problem relatively focusing on how to arrange and optimize the executive compensation on incenting mechanism to motivate executives to serve shareholders’ interests have attracted huge attention in China, which has been haunting theorists and practitioners. Under such circumstances, it is very meaningful to analysis the implementing effect of executive compensation incentives from intern and external corporate governance angles.The thesis summarizes and discusses domestic and foreign literature, also it reviews the theories related to the relationship between compensation incentives and corporate governance. And then, it analysis the factors that influencing the implementing effect of compensation incentives and its path. Combining with theoretical analysis, the thesis selects the listed companies in Shanghai and Shenzhen stock markets from 2008 to 2013 as the research sample. It analysis the existence of pay-performance sensitivity and pay-performance stickiness, studies the impact of intern and external corporate governance on the executive compensation incentives by using the methods of variables analyzing and positivism analyzing. According to the market competition degree, the research sample is divided into two sections. Similarly, according to the equity structure, it is divided into three sections. By using the methods of compare analyzing, the research studies each ratio of pay-performance sensitivity and pay-performance stickiness. Then this thesis has some main conclusions as followed:First of all, this thesis analysis the pay-performance sensitivity of executive. The studies show that: there are prominently positive relevance between executive compensation and corporate performance. The study shows that market competition has a significant positive correlation with accounting-based performance; but the competition doesn’t affect the market-based performance. But in general it seems that the competition has a certain influence on the pay-performance sensitivity. It is a reverse “U” type relationship between the ownership concentration and the pay-performance sensitivity of executive. It shows that moderate equity structure will effectively strengthen the pay-performance sensitivity. Besides, the degree of market competition and ownership concentration has a mutual impact on each other. Secondly, the research shows that the executive compensation of listed companies is characterized by stickiness. The fierce market competition would weaken the stickiness of top management compensation. By comparing the pay-performance stickiness of listed companies with different concentrations of equity structure, this thesis demonstrates that moderate ownership concentration will effectively weaken the pay-performance stickiness, What is more, the level of competition in different industries, ownership concentration has a different impact on the pay-performance stickiness. To sum up, not only market competition and equity structure effect the executive compensation incentives respectively, but also interact each other. Throughout the paper, main innovations are as followings: First, the research conclusion is very comprehensive to analysis the implementing effect of executive compensation incentives from pay-performance sensitivity and pay-performance stickiness respects. Second, it studies the interaction between market competition and equity structure on the executive compensation incentives, which provides a new angle. Thirdly, it measures financial performance in terms of accounting-based performance market-based performance, and the sustainable growth rate is used for robust test, which diversify the research design.