Audit Quality,Managerial Power And Executive Compensation Stickiness

In recent years,the executive compensation of listed companies has been receiving widespread attention from all walks of life,the exposure of “high price”salary reflects that executive compensation management is actually in a state of out-of-control.Linking corporate performance to executive compensation is the original intent of the pay contract,and it is also an important means for shareholders to maximize their profits.However,related studies have found that the marginal increase in executive compensation when corporate performance is rising is greater than the marginal reduction when performance declines,which means that there is a“sticky” characteristic between executive compensation and corporate performance.Managerial power theory holds that executive rent-seeking is an important factor in inefficient compensation contract.As an important external oversight mechanism,high-quality external audit can supervise and standardize management's power boundary and its efficiency,help to improve the compensation incentive mechanism,and then realize the scientific and efficient of internal governance structure of the enterprise.Based on principal-agent theory,optimal contract theory and managerial power theory,this paper explores the internal relationship between audit quality,management power and executive compensation stickiness in order to provide empirical evidence and targeted policy recommendations for improving the executive compensation mechanism and governing executive compensation stickiness.Choosing the data of 2011-2016 Shanghai and Shenzhen A shares listed companies as research samples,based on the definition of related variables,the relevant literature on audit quality,management power,and executive compensation stickiness is systematically reviewed,and hypotheses are proposed based on theoretical analysis.The empirical research results show that:(1)The listed companies generally have asymmetrical changes in their pay and performance,that is executive compensation stickiness.(2)Managerial power has a significant positive effect on the stickiness of executive compensation.The greater of managerial power,the greater of executive compensation stickiness.(3)External auditing has significantly reduced the executive compensation stickiness of listed companies in China.The higher the audit quality,the smaller the stickiness of executive compensation.(4)High-quality external audit can effectively inhibit the positive impact of management power on executivecompensation stickiness.Based on the above conclusions,this paper proposes relevant policy recommendations from the aspects of in-depth study of executive compensation stickiness factors,optimize the structure of executive compensation,improvement of the internal governance mechanism of the company and further improvement of the audit market,which has certain reference significance in improving the corporate governance structure,suppressing the executive compensation stickiness,and improving the effectiveness of the pay contract.