| With the separation between management authority and ownership in the modern enterprise, the principle-agent relationship has been created. However, the executives who manage the company always have different targets from owners. An effective way to settle the problem is that you can hook relations established between the goal of the clients and the goal of the agents, In other words, you can link executive compensation to corporate performance. What's more, there is information asymmetry between executives and owners. An effective way to settle this problem is that you can take the company's disclosure quality into consideration. Accounting information disclosure quality will affect the reliability and authenticity of performance indicator which relates with executive compensation.In this paper, the definition of disclosure quality is the quality of accounting information. Based on testing the relationship between executive compensation and corporate performance, the paper introduce cross-multiplying terms to study the effect of disclosure quality on pay-performance sensitivity. The research results show that:executive compensation is not related with corporate performance in main board companies; In SME board and GEM, executive monetary compensation is positively and strongly related with corporate performance while stock incentive has no relationship with performance; disclosure quality has effect on the relationship between executive compensation and corporate performance. When disclosure quality is lower, the reliability and authenticity of performance indicator is lower and the connection between executive compensation and corporate performance becomes less and less closer. Therefore, listed companies should optimize the structure of executive compensation, and implement long-term incentives. What's more, the relationship should be established between executive pay and performance. At the same time, attentions should be paid to improve the disclosure quality. |
PDF Full Text Request