Executive Compensation And Corporate Performance After Control Transfer

Control transfer does not necessarily improve corporate performance alone. From the strict definition of the market for corporate control, control transfer without change in property right doesn't match the true sense. Its independent external corporate governance is hard to emerge. Based on samples of control transfer events without changes in property rights and industry from May 1st, 2005 to December 31 st, 2007, this paper test the correlation between changes in executive compensation and corporate performance after control transfer. This paper found that(1) after control thansfer, corporate performance continues to promote;(2) there is a significantly positive correlation between the increase in executive compensation and the improvement in corporate performance. The robustness tests show there are few companies with changes in government level and executive political ties, which supports that there is less need to take into consideration. Changes of Executives and key managers can enhance performance but have weaker significance. After adding the multiplied variable of executive pay and change of key managers, the coefficient is not significant. It means increase of executives pay play more importance on corporate performance than change in key managers.