The External Audit, Property Right And Stickiness Of The Executive’s Pay

The high executive’s pay and the executive’s scandal which have been occurred frequently push the executive’s pay to the public opinion’s teeth of storm and the public company have already built system on executive’s pay completely with the development of market economy system and the better improvement of modern enterprise system, but the executive’s opportunistic behavior and other negative factors result in the appearance of the executive’s pay’s stickiness. We can know the existence of the stickiness of executive’s pay is the result of incomplete corporate governance and modern corporate system from above and it’s obviously very important to depress the stickiness of executive’s pay now. Studies about stickiness of executive’s pay are already mature in China and lots of studies have proved the stickiness of executive’s pay in public company by using empirical method, and the state-owned company’s stickiness of executive’s pay is stronger than the private company. But the research about the factor which affects the stickiness of executive’s pay is rare, so the study on it is very important to enrich the literature on stickiness. The empirical study proves that the internal control of high quality can improve the whole level of corporate governance to weaken the stickiness of executive’s pay through depressing the executive’s opportunistic behavior. External audit and internal control has the same effect system and they have some effect of substitution in supervising enterprise. External audit as a third independent supervisor to supervise enterprise from outside of the company and it is playing a more important role with the developing of the auditing market. This article’s purpose is to research whether external audit can depress the stickiness of executive’s pay through raise the level of company’s incorporate governance. Considering the special background of Chinese economic system, we take the property right as an important factor to research its effect on the depressing effect.Using the company’s performance, the change of performance and audit quality which measured by whether it has been audited by the tenth-biggest audit firm as the independent variables and using the software stats11.0 to research the effect of external audit on stickiness of executive’s pay measure audit quality by taking advantages of the A-share public company’s data from 2012 to 2014 which excluded the companies of finance and the company which data is lost and finally got 6381 data. The article establishes weaken-effect ofexternal audit model based on the predecessors and uses it to research the existence of the weaken effect of high audit quality and to research different property rights’ effect on the weakening under the special economic background and divided the sample into two categories to analysis the different effect of different property rights using contrast method.The article found that external audit indeed has the power to depress the stickiness of executive’s pay. The companies have been audited by the tenth-biggest audit firm has a less stickiness and high audit quality can weaken the stickiness of executive’s pay. Compared private company and state-owned company found that state-owned enterprises’ weaken effect is bigger than the private company. The research is meaningful for the corporate governance and the rich of literature.