Reference Points Effect Of Managerial Compensation And Its Incentive Results

The manager market theory holds that the main reason for the increase in executive pay is that executives’ liquidity in the executive market is enhanced(Murphy,et,al.,2004;2007).On this basis,Gabiax and so on(2008)use the market equilibrium model to find that CEO compensation growth has conduction effect in the same industry.Bereskin and so on(2013)support this view from an empirical point of view.In fact,this phenomenon is rooted in a benchmarking company in the formulation of executive compensation by the compensation committee,namely the light industry company executives salary level to design the company’s executive compensation contract(Bizjak et al.,2008),is the formulation of executive compensation contract exists with the reference effect.However,the existing research lacks the in-depth study of reference point effect of industry and region executives,and mostly takes reference point effect as the premise of research,and explores its economic consequences.This article from the Chinese industry listed companies executives’salary and area reference point effect angle,first using the Kruskal-Wallis H nonparametric test was used to test the executive compensation among industries and between regions,industries and regions proved the existence of the reference point effect;and the difference sequence arrangement of Spearman rank correlation test,prove industry and region of the reference point effect has a certain stability;finally,using the OLS regression method of reference point effect incentive effect is verified.This paper consists of the following five parts:The first part is introduction.First of all,this paper introduces the background and significance of the research,and then briefly describes the research ideas and research methods,and finally summarizes the innovation points of the article.The second part is the theoretical basis and literature review.Firstly the related theory of executive compensation are summarized,and relevant literature on the sensitivity of executive compensation and the compensation performance and summed up to summarize the current research perspective and ideas and shortcomings,put forward on the basis of this research ideas and perspectives.The third part is the reference point effect of executive compensation based on industry and region.This part puts forward the research hypothesis on the basis of theoretical analysis,through the data analysis of the status of executive compensation of listed companies between China sub sectors and sub regions,the existence and stability of reference point effect and then use empirical method to verify,finally use the classification of different industries and regions of the conclusion of the study of robustness test.The fourth part refers to the effect of reference point on the incentive effect of executive compensation.Analysis of the related theory,effect of reference point on the effect of executive compensation and pay performance sensitivity,further investigated the reference point effect incentive effect,finally the robustness test on related conclusions.The fifth part is research conclusions,policy recommendations and research prospects.On the basis of the previous research,we draw conclusions and put forward relevant policy recommendations,and finally summarize the limitations of the article and propose future research prospects.This paper uses Chinese Shanghai and Shenzhen 2009-2016 two listed companies as the research sample,reference point effect on executive compensation is studied,at the same time in order to ensure the robustness of the research results,this paper in the robustness test are used to substitute the relevant index,to avoid the deviation of different measurement index to the conclusion of the study may cause.Based on theoretical analysis and empirical results the following conclusions:there are more robust Chinese listed companies significant region and industry reference point effect,and this effect remained stable in a certain period of time;the industry and regional reference point effect on executive compensation changes play a positive role in promoting,and a significant negative effect on inhibition since the pay performance sensitivity.There are two main innovations in this paper:(1)improve the research framework of reference point effect of executive compensation.The existing literature lacks the reference point effect research on executive compensation,most of which directly refer to the reference point effect as the premise of the study,so as to explore its possible economic consequences.The manager market theory and managerial power theory based on the analysis of existence and stability from the perspective of two industries and regions to explore the executive compensation reference point effect,provide a solid empirical evidence for the effect of reference point on the,(2)comprehensively evaluate the incentive effect of reference point effect of executive compensation.Study on the current reference point effect on executive compensation mostly focuses on the research on the relationship between the reference point and executive compensation growth,lack of complete compensation system verification of the industry and the region reference point,and the reference point effect to study changes in executive compensation and pay performance sensitivity.This paper examines two kinds of reference effect,and from the two aspects of changes in executive compensation and pay performance sensitivity of reference point effect,deepen the understanding of reference point effect incentive effect,contribute to the research literature reference point effect on China’s existing compensation contracts,and provides empirical evidence for reference the company for the development of executive compensation policy.