An Empirical Study On The Effect Of Executive Compensation On The Efficiency Of China’s Listed Banks

Commercial bank is an important component of the economic system in China, and its management status has an irreplaceable role in the allocation of social resources and the development of China’s national economy. Improve the governance mechanism of China’s commercial banks, and promote the reform and innovation of commercial banks is an important guarantee to change the mode of development and achieve sustainable development. Efficiency as the bank resources use rate and the overall competitiveness of the reflected and determines the future direction of the bank, so the efficiency of study of banking risk control, it has an important significance to improve the performance. Facing the present complex, intense and changeable competitive environment, China’s banking industry is only to improve the efficiency of the bank, can become a powerful guarantee for the development of social economy. However in order to achieve this purpose, we need to optimize the governance structure of Bank of China, the executive compensation as a problem of governance of commercial banks is an important index, for the promotion of bank efficiency and value creation has important significance. In recent years, although many scholars are standing in a different perspective on the efficiency of different commercial banks value is measured and its influence on efficiency value factor to carry on the system analysis, in order to improve bank efficiency find effective measures, but few scholars will corporate governance in executive compensation standard and bank efficiency combining research, the study of executive compensation on commercial bank efficiency effects of improve banks’ compensation system is of special significance. So in this paper, taking this as a research, selection of China’s 16 listed banks as research samples, based on principal-agent theory, corporate governance theory and efficiency theory as the theoretical support and in reference to the domestic and foreign literature research method based on, chooses the input and output variables, using non parametric DEA (Data Envelopment Analysis) method, of samples of commercial banks in 2008 to 2014 the cost efficiency, technical efficiency, pure technical efficiency, scale efficiency and allocative efficiency measurement and evaluation and analysis. In addition, through the establishment of panel data model with mixed in introduction of the commercial bank scale, resource allocation, profit ability, liquidity and other control variables based on regression analysis, explore the influence of executive compensation of listed bank cost efficiency, according to empirical results, we propose to improve operating efficiency of targeted recommendations.In this paper, first of all, through the comparison of the efficiency values measured by the sample bank, we found that the overall efficiency of China’s listed commercial banks was higher in 2008-2014, and showed a trend of fluctuation. This shows that the stability of China’s commercial banks is stronger, the internal control is more rigorous, the level of governance is higher, the efficiency is relatively good. With the deepening of China’s commercial banks in the financial system reform, perfect governance structure, are closely related and relatively fair competitive environment; especially the listed banks in the city firm, different efficiency value are completely effective; the city commercial bank as a new financial strength, and constantly improve their efficiency, so that talent shows itself in the fierce competition; joint-stock commercial banks and state-owned banks and city commercial banks compared to the efficiency value is slightly lower, probably due to the sample number of joint-stock banks, the existence of differences between banks, which also shows that the joint-stock commercial banks need to efficiency in order to improve the internal governance structure basis; state-owned commercial bank efficiency in recent years also can be improved effectively, and the state-owned banks to strengthen financial innovation, the balance of business development, and gradually realize the market greatly relation。In addition, through the executive compensation of listed commercial bank cost efficiency relationship of multiple linear regression analysis, the empirical analysis shows that, after adding executive pay to the explanatory variables in the factors affecting the efficiency, model fitting degree is good. There is a significant correlation between executive compensation and the efficiency of listed banks, and the relationship is inverted U type, which shows that the change of executive compensation can explain the change of the efficiency value of listed banks. When the executive pay below the critical value of executive compensation and listed bank efficiency is positively correlated, at this time, bank efficiency will increase with the increase of executive compensation, but when it is higher than the critical value, executive pay and bank efficiency was significantly negative correlation, executives will ignore the goal to maximize the profits of enterprises, and the choice to realize the maximization of their own interests. It shows that reasonable executive compensation is helpful to improve the efficiency of commercial banks, but when the executive pay is too high, the impact on bank efficiency is negative. Therefore should establish associated with the commercial bank performance and risk management of salary and performance incentive system, improve the long-term incentive mechanism, improve the proportion of stock options, options, and other long-term compensation, more attention to long-term interests, to avoid short-term behavior, so as to realize the marketization compensation mechanism. The impact of remaining control variables of listed bank cost efficiency is more significant, bank size, asset liability ratio and deposit ratio has a significant negative correlation with efficiency; two indicators of profitability, net assets income rate, per share earnings of listed bank efficiency has significant positive effects. According to the empirical results, this paper proposes the corresponding perfect salary incentive mechanism, improve the efficiency of the proposal, mainly including adjustment of bank executive compensation structure, to implement the combination of short-term incentive and long-term incentive salary system, rationally control the scale of optimizing the allocation of resources, cultivating core competitiveness, improve the profitability of banks and asset liquidity.