Customer Relationship Transaction,Executive Pay-performance Sensitivity And Inefficient Investment

China has been a typical relationship-oriented society,while the socialist legal system with Chinese characteristics has taken initial shape,but interpersonal transactions in economies still occupies an important position.Establishing trust between firms through relational transactions can reduce enterprise transaction cost and realize value creation.The transactions between the firm and major customers will cause more relationship-specific investments,and it needs executive do much more to maintain the intrinsic value of specific assets.So these firms need pay attention to how to design an effective incentive mechanism of executive compensation so as to maintain social relationship.The existing literature from the perspective of relationship transactions explains the phenomenon of lower executive compensation performance sensitivity,but it has not been concerned about the economic consequences of reducing executive pay incentives.It provides an opportunity for further studies about relational transactions.This paper examines the impact of customer concentration on executive pay-performance sensitivity and corporate inefficient investment,taking the A-share listed companies from 2009 to 2015 in Shanghai and Shenzhen Stock exchanges as samples.Empirical results show that customer relationship transaction significantly reduce executive pay-performance sensitivity,no matter in SOEs or non-SOEs,and more significant in non-SOEs.The negative impact of customer relationship transactions on the firm of lower the executive pay-performance sensitivity is greater.Executive pay-performance sensitivity which is influenced by customer relationship transaction significantly increases the corporate inefficient investment,and the effect is larger and more significant in the more serious inefficient investment firms.Further research shows that executive pay-performance sensitivity significantly increases over-investment and under-investment.Executive pay-performance sensitivity resulted from customer relationship transaction significantly increases inefficient investment only in non-SOEs and firms operating in high environmental uncertainty.Finally,This paper puts forward some specific policy advice how to enhance the sensitivity of executive compensation performance and reduce inefficient investment from the perspective of customer relationship transaction.These studies provide a theoretical basis and reference for deepening the economic consequences of customer relationship transaction and the influence of the ownership structure and the external environment on the firm decision-making behavior.