Study On The Relationship Among External Equity Of Executives’ Compensation,Investment Efficiency And Corporate Performance

How to effectively motivate executives to enhance corporate performance has always been the focus of academic research.The results of current research on executive compensation incentive are relatively rich,but there are not many researches on effect of relative compensation incentive of executive compensation equity,and most of the scholars only focus on the incentive problems of internal executive compensation equity,rarely study from the perspective of external equity of compensation.External equity of executive compensation,as an important incentive mechanism,has a great influence on the effort of executive,and then has impact on corporate performance to some extent.In recent years,as the wide compensation gap and unequal distribution among the executives of listed companies in China was constantly reported by the media,the equity of executive compensation distribution arouse widespread concern from the public equity allocated to executive compensation.Problems about if executive external compensation gap is reasonable and how external compensation equity can affect the executives has become the focus and trend of researches in academia.Based on logical framework of theory and literature review,hypothesis,empirical test and result analysis,this paper analyzes the relationship between external equity of executive compensation and company performance by empirical methods,and on the basis of this,it further studies whether investment efficiency plays an intermediary role in their relation.First,it organizes and summaries the existing content of the literature on distribution equity of executive compensation,company performance and investment efficiency,and the intermediary role of investment efficiency,and then introduces and analyzes the mechanisms of principal-agent theory,social comparison theory,equity theory and tournament theory mechanism,and the applicability combined with the subject of this paper.Secondly,combining the consideration arouse by social situation of executive compensation inequity,drawing existing ideas and methods and using related theories to support the perspective of horizontal comparison of corporate executive compensation,it put forward three related hypotheses on the relationship between external equity of executive compensation,company performance and investment.Finally,it chooses the data of A-share listed companies from 2010 to 2014,establishes the appropriate regression model and conducts empirical analysis.The results show that first,external equity of executive compensation and corporate performance has an inverted "U" shaped relationship.Secondly,external equity of executive compensation and investment efficiency has an inverted "U" shaped relationship.Thirdly,the intermediary role of investment efficiency in the relationship between external equity of executive compensation and company performance has not been verified.According to the statistics,this paper found that currently,the executive compensation in Chinese listed companies is in an overall state of distribution inequity,and that improving external equity of executive compensation to some extent can enhance the company performance,and it also put forward some corresponding policy proposals.