Core Executive Turnover,Industry Characteristics And Executive Compensation

In the modern corporate governance,the separation of ownership and management has brought serious agency problems.As a means of corporate governance,executive compensation has been regarded as the key to solve the principal-agent problem,reasonable compensation policy can effectively reduce the agency cost between the owner and the manager.In recent years,with the executive turnover events gradually increased,more and more scholars begin to pay attention to the relationship between executives turnover and executive compensation.However,the existing research focuses more on the executive compensation policy on the impact of executive turnover,whether executives turnover will cause the executive compensation policy changes is lack of sufficient attention.Therefore,when the core executive turnovers,whether other incumbent executives compensation will change and how to change will be the focus of this paper.In addition,the company can not ignore the influence of external factors in the formulation of compensation policy,the difference of executive compensation policy under different industry characteristics is also the content of this paper.Based on the principal-agent theory,human capital theory and incentive theory,we combine with the existing literature at home and abroad,and analyze the possible changes of other incumbent executives compensation policy after core executive turnover from the theoretical level.Then,we introduce the industry competition degree and industry prosperity to further consider the differences in other incumbent executive compensation policies under the different industry characteristics.Then,taking the data of China’s GEM from 2010 to 2015 as the research sample,we empirical test the hypothesis.The results show that:(1)when the core executive turnover,the new core executive will strengthen the incentive of other incumbent executives,other executives compensation will significantly increase.Then further divide the executive compensation into equity compensation and monetary compensation,we finds that the new core executive mainly encourage other incumbent executives by raising their monetary compensation.(2)in a highly competitive industry,the growth of other incumbent executive compensation is greater than that in the industry with a low level of competition after the core executive turnover.(3)in the high degree of industry prosperity,the growth of other incumbent executive compensation is greater than that in the industry with low level of prosperity after the core executive turnover.(4)after the core executive turnover,the sensitivity of other incumbent executives compensation and performance will increase.According to the above conclusions,this paper proposes the following recommendations:(1)improve equity incentive system,optimize the executive compensation incentive structure.(2)combined with the company’s internal and external environment,develop a reasonable incentive policy.(3)improve the internal governance structure,establish and improve the internal governance mechanism.(4)to strengthen the transparency in the disclosure of executive compensation.