Research On Impact Of QFⅡ On Executivepay-performance Sensitivity Of The Listed Corporation

Principal-agent problem between shareholders and the management is one of the core issues of corporate governance that needed to be addressed. Establishing a correlation mechanism of the interests between the two through pay contract, the degree of interests’ deviation can be reduced, the agency problems exist between the two will be alleviated. Executive pay-performance sensitivity is an important indicator to measure the effectiveness of the pay contracts. It’s widely used by scholars. But, in China, listed companies’ executive pay-performance sensitivity is not high, especially in state-owned listed companies. Research on the impact of Qualified Foreign Institutional Investors on can provide theoretical guidance to listed companies to improve executive pay-performance sensitivity. However, existing scholars’ researches still have shortcomings, providing a need for further research.Based on the principal-agent theory and incentive theory, internal and external factors that QFII impact on executive pay-performance sensitivity had been analyze, as well as the different impact of QFII on executive pay-performance sensitivit y under companies of different controller. To avoid losses and obtain benefits QFII will actively promote the executive pay-performance sensitivity. And the legal system may also make QFII to promote the pay-performance sensitivity. Because of the government’s compensation regulation, supervision and lack of sensitiv eness, QFII’s impact on the state-owned enterprises’ executive pay-performance sensitivity will be weaker than on the non-state-owned enterprises’. Based on the theory analysis, hypotheses are proposed. The impact of QFII on pay-performance sensitivity will be researched. Further, according to the actual controller, the sample was divided into two parts. The thesis selected the Shanghai and Shenzhen A-share companies listed during 2003 to 2013 as samples by means of Eviews for the model empirical testing. The empirical results are as follows: first, the introduction of QFII can effectively increase the sensitivity of executive pay to company performance; second, the higher the proportion of QFII holdings, the stronger the effect on enhancing executive pay-performance sensitivity; third, QFII can play a role in improving the executive pay-performance sensitivity in government enterprises, but the strength of role is weaker compared with the role in non state-owned enterprises. The empirical results show that QFII can play a positive role to alleviate two ag ency problems in corporate governance. It can promote listed companies to improve their Salary incentive mechanism and improve their management efficiency. At the same time, these results provide evidence for the support of the implementation of QFII system and gradual relaxation of policy restrictions, which making QFII play a better role in China’s capital market.