Research On The Influence Of Peer-Effect On Executive Pay And Pay-performance Sensitivity

With the increase of social informatization and social communication,the study on the formulation of executive compensation has become a complicated and tedious issue,and executive compensation incentives have increasingly attracted the attention of business owners and scholars.At present,the study on executive compensation in China mainly focuses on internal corporate governance such as company performance,company size,capital structure,board characteristics,and personal characteristics of senior executives.However,it ignores the study of individual interactions among senior,that is,peer effects.This article starts from the perspective of external corporate governance to study the changes in executive compensation,and further studies the effect of changes in executive compensation on executive incentive,that is,the sensitivity of compensation performance.Different from previous scholars,based on the premise of the same industry,this paper considers the geographical location and the ownership heterogeneity to study the effect of the peer effect on executive compensation changes,and and then studies the effects of salary incentives.Using the relevant data of all non-financial listed companies in China from 2010 to 2016,the descriptive statistics of the current status of executive compensation of listed companies in China are first performed.Then use the pearson correlation analysis to determine the correlation between the main variables.On this basis,a statistical test was conducted by controlling the influence of other related variables.This paper adopts a combination of theoretical and empirical research methods and finds that the same group utility is common and obvious in Chinese listed companies.That is,that is,the company will refer to the compensation levels of other companies in the same industry when formulating executive compensation,which in turn promoteing the continued rise of executives compensation.After considering the heterogeneity of ownership,it is found that this effect has a significantly higher impact on state-owned enterprises than non-state-owned enterprises in the same industry.State-owned enterprises are more likely to use the same group effect to increase executive compensation.After considering the geographical heterogeneity,it is found that in the same industry,this effect has a significantly higher impact on the center cities.The non-central cities indicate that the same group effect will also have different effects due to the geographical location of the company.At the same time,it has been found that the same group utility of executive compensation has a certain incentive effect for senior executives,which will motivate executives to create more value for the company.The cohort effect of executive compensation will increase the company's pay performance sensitivity,and the positive effects of state-owned enterprises and central cities are even more pronounced.Therefore,while listed companies prevent excessive growth in executive compensation due to cohort effects,they should not weaken the positive effects of rising executive compensation and corporate performance.The company's remuneration committee can strictly control the potential opportunistic behavior of senior executives by designing a more reasonable compensation incentive mechanism,and promote the realization of executives' own value and corporate value.