Empirical Research On The Relationship Between Executive Compensation Stickiness And Corporation Performance In Chinese Listed Companies

Executive compensation of listing Corporations in China is considered to be the effective method to solve the principal-agent problems.There are many studies making sure that executive compensation is related to corporation's performance,and the compensation plays a incentive role.However,some researchers have noticed that the sensitivity of executive-compensation performance is asymmetric.This means: the compensation increases owing to the increased achievement much higher than the compensation decreases owing to the decreased achievement.The other side,the pay will increase when the achievement is declining.This asymmetric feature is called compensation stickiness,and it implies that the corporations prefer rewarding to punishing to the executive managements.The paper is based on the sample data of the Stock Exchange A Share listed companies from 2010 to 2014.The executive compensation is defined as monetary and equity compensation,and it is related to net profit after deduction of non-normal and net operation cash flow.This paper choose ROE as the dependent variable.It controls company size,assert-liability ratio and so on.Finally,it researches the relationship between the compensation stickiness and corporation performance so that it can make sure the stickiness is reasonable or not.Results show that:(1)The compensation stickiness is common in the listed corporations.And the stickiness is significant higher when the pay is related to the net operation cash flow than it is related to the Net profit after deduction of non-normal.(2)The stickiness is harmful to the corporation performance.It means when the compensation is sticky it loses its effects.This paper suggests the firms should make up effective pay-cut system to avoid lost.(3)This paper divides the data into two parts: the higher increased and the lower increased.For the higher one,the stickiness is harmful.But for the lower one,the stickiness is helpful.So this paper includes the companies should choose different compensation system when it has different develop phases.