The Correlation Analysis Between Politically Connected Independent Directors And Executive Compensation

The executive compensation of listed companies has always been a focus of public attention,it is not only an important part of business management but also related to a series of social problems.Combined with the institutional background of China,the effects of politically connected independent directors on executive compensation in enterprises with different ownerships were examined using Poolded OLS,Stepwise Regression and Ridge Regression based on the sample of Chinese non-financial A–share listed companies from 2003 to 2014.Due to the endogeneity resulting from the possible self-selectivity of politically connection,the robust test is carried out using the PSM.This paper finds that in state-owned enterprises,the executive compensation of companies with politically connected independent directors is significantly lower than that with no such independent directors,while in non-state-owned enterprises,politically connected independent directors have no such significant effect on executive compensation.These results indicate that the mechanisms of politically connected independent directors are different in enterprises with different ownerships.It is found that politically connected independent directors have different mechanisms at different levels of pay and enterprises of different sizes in the process of in-depth analysis of the state-owned enterprises.And the reduction of executive compensation brought by politically connected independent directors has no significant impact on future business performance.This study examines the effects of company’s political connection on executive compensation from the perspective of independent directors,which sharpen the understanding of executive compensation,broaden the study of political connection,and enrich the theory of independent directors.