The Study Of Debt Deadline Constraints Influence On Executive Pay Performance Sensitivity

The bond market in our country is not enough mature, bank become the first main body of creditors. When making credit decisions,as a rational creditors, bank will take the initiative to pay attention to all aspects of the mechanism which the loan enterprise established to balance the possible risks. As an important part of corporate governance, the executive’s compensation incentive mechanism is bound to recieve attention.some research have suggested that although it is possible to make the interests of the shareholders and senior executives consistent through combining the executive’s pay with the company’s operating performance,which may,to some extent, relieve the agency problems about the rights between shareholders and executives, it ignores the agency problems which result from debt. The reason is that performance-related executive compensation may motivate executives risk transfer to encroach on the interests of creditors by risk transfering.The constraint effects caused by different loan’s time-limitation for the debtor is different. In our country, the judicial system which is used to protect the rights and interests of creditors, is not sound.However,the short-term loans’constantly repaying and refinance make the bank better supervise the behavior of the managers.Meanwhile, the short-term loans will bring some constraints to the enterprise by the time-limitation. In order to get bank loans to the steady, the borrowing enterprise may take the initiative to adjust the executive compensation’s sensitivity to performance.Under different condition,the constraints of debt maturity the companies faced is different.And their attitude to the debt-maturity-constraints also exist differences.That how will the sensitivity of executive compensation-performance be influenced on by the constraint of debt maturity under different institutional environment is the main study content in this paper.Haven summarized previous studies, this paper will choose the principal-agent theory, the optimal contract theory, agency cost theory as the basis.The whole process of the research will be combined with the special situation of China. In order to conduct research, this paper will collect the relevant financial data of the Shanghai a-share listed companies covering the period of 2009 to 2014. This paper mainly choose the perspective of property rights and marketization process to study how will the constraint of debt maturity influence on the sensitivity of executive compensation-performance.When other conditions are controlled, the results indicate that:(1)executive pay-performance sensitivity will decrease when the debt ratio is increasing;(2)the more intense the constraint of the debt maturity is,the lower sensitivity of executive compensation-performance;(3)the constraints faced by state-owned enterprise which caused by debt deadline have not significant (negative) effect on the sensitivity of executive compensation-performance;(4)the constraints faced by non-state-owned companies which caused by debt deadline exist negative impact on the sensitivity of executive compensation-performance;(5)the level of marketization weaken the negative influence which the constraint of debt maturity have on the sensitivity of executive compensation-performance. The above conclusions will help to promote the governance efficiency of listed companies,and improve the judicial system which is aim to protect the creditors’ rights and interests.They also can provide some policy suggestions on reformation of soes and finacing structure.At the same time, they can provide some theory support to the work of the marketization accelerating.