Empirical Research On The Relationship Between Government Subsidies And Executive Excess Compensation

The optimal compensation contract theory was thought to effectively solve the problem of asymmetric information between executives and shareholders, but mechanisms for performance-related pay and strict compensation control did not prevent the chaos of "sky-high compensation " and "salary inversion". Executive pay and performance is not associated: company executives’ pay rise but corporate profits decline. Executive excess compensation problem is very serious. This not only aroused public discontent and doubts, but also forced the introduction of pay reform plan. Specification of income distribution order, to achieve an appropriate level of compensation and adjustment to the unreasonable high income is the most important reform of the current pay system.Discussion on the source of executive excess compensation is always an important focus in academia. In compensation contracts, the government subsidy as the non-recurring gains and losses included in the current profits. It is a typical exogenous variable and is the noise of the compensation performance, which can stimulate executives to capture the profits, and breeds the lazy and rent-seeking behavior of executives. Whatever executives take government subsidies for fictitious profits to improve the company’s short-term performance or grab gain directly can enable significantly increased the level of executive excess compensation. Therefore the author thinks that the government subsidies and executives excess compensation have inextricably relationship. It is worth further study.Based on this background, the paper theoretically analyzes the relationship between the government subsidies and executive excess compensation, and empirically examines the nature of executive excess compensation, and impact of government subsidies on over-compensation by using the samples over 5 years from 2010 to 2014. This paper found that:(1) The government subsidies are significantly related to the executive excess compensation. Government subsidies provides an explanation for the source of executive excess compensation.(2) CEO duality positively moderates the government subsidies-executives excess compensation relationship. In state-owned enterprises and non-state-owned enterprises, the degree of regulation is different. Regulatory role in state-owned enterprises is not significant adjustment while in the non-state-owned enterprises the regulatory role is significant.(3) The direction of regulation is different when the proportion of independent directors moderates the government subsidies-executives excess compensation relationship, which is positive regulatory role in the state-owned enterprises and significantly negative regulatory role in the non-state-owned enterprises.(4) Ownership concentration negatively moderates the government subsidies-executives excess compensation relationship. By contrast, the negative correlation is more significant in state-owned enterprises.In the end, on the basis of theoretical and empirical analysis this article put forward the corresponding suggestions to improve the effect of government subsidies and perfect executive assessment system and the corporate governance structure.