Study On The Influence Of External Governance Environment On The Relationship Between Executive Compensation And Environmental Performance

With the implementation of China's new environmental protection law and the attention to the environmental protection and ecological civilization by the social during the National People's Congress and the Chinese Political Consultative Conference in recent years,the environmental performance has become a hot topic among the scholars.As the backbone of the national economy,listed companies should consciously assume the social responsibility to protect the ecological environment and promote the healthy and orderly development of the national economy.Executives are the core stakeholders of the enterprises,as well as the main executors of environmental activities and environmental protection measures.The level of the executive compensation of executives reflects the past business performance and management conduct of the executive to a certain extent,thus influencing the executive's decision and behavior to the corporation's environmental performance effectively.In order to deeply understand the impacts of corporate executive incentive on environmental performance,this paper firstly sorted out the existing literature of executive compensation,environmental performance and external governance environment based on the principal-agent theory,legitimacy theory and stakeholders theory to form the research framework.Secondly,this paper puts forward the hypotheses and research model of the relationship between the executive compensation and environmental performance under the external governance environment.Finally,this paper uses the PSM method to eliminate the interference of endogenous factors and empirically tests the influence of executive compensation on environmental performance,and further studies moderating effect of external governance environment on the relationship between executive compensation and environmental performance based on the listed companies on the Shanghai and Shenzhen Stock Exchange from 2014 to 2017 with other factors invariant.Research result shows that there is an inverted “U” shape relationship between executive compensation and environmental performance and environmental performance,and external governance environment produces different impacts on the relationship at various levels of executive compensation.When executive compensation is lower,executive compensation and environmental performance are positively correlated,high government intervention of external governance environment will weaken this positive correlation while whether the level of rule of law is high or low does not affect this positive correlation;when executive compensation is higher,executive compensation and environmental performance are negatively correlated,high government intervention will strengthen this negative correlation while high level of rule of law will weaken this negative correlation.Based on the results of empirical research,the paper puts forward several managerial suggestions to the company and government in strengthening internal environmental management,improving environmental regulation and creating a low degree of government intervention,a high level of rule of law of the external governance environment.