Will External Guarantee Affect The Sensitivity Of Executive Compensation Performance Of Listed Companies?

With the continuous development of our economy,the relationship and exchanges between listed companies are becoming more and more close.The increasing number of external guarantees,although to a certain extent can bring commercial opportunities to listed companies,enhance the value of the company and facilitate the transfer of benefits,the possible series of adverse effects of external guarantee cannot be underestimated.It would cause damage to the assets of the guarantor company and it could result in its insolvency.External guarantee has become an important part of corporate risk.In this context,how to reduce the operational risk of the company,how to better motivate the company managers and make it consistent with the interests of shareholders have become important issues to be solved by listed companies.Therefore,it is of far-reaching significance to study the impact on corporate governance from the perspective of external guarantee matters.Based on the data of A-share listed companies in Shanghai and Shenzhen from 2010 to 2016,this paper draws the following conclusions by regression analysis:(1)the external guarantee will have a significant negative impact on the performance sensitivity of executive compensation of listed companies;(2)the grater the scale of external guarantee,the more significant the sensitivity of executive compensation performance;(3)compared with state-owned enterprises,when non-state-owned enterprises face the risks and uncertain performance caused by external guarantee,the sensitivity of executive compensation performance decreases more significantly,which shows that when the listed company has the external guarantee,the high risk and high uncertainty associated with the external guarantee will not be an effective incentive measure.At the same time,because shareholders need to judge the level of management efforts through the level of corporate performance,and the increase of risk will undoubtedly increase the error in judging management efforts,when the risk increases,the best executive pay performance sensitivity will become less.When the company is faced with the uncertainty of performance and the existence of operating risks,it is particularly vital to choose appropriate incentives for management personnel.Shareholders need to balance the relationship between risk and incentive.In addition,the sensitivity of the executive compensation performance of the listed companies in the sample China and the degree affected by the external guarantee are lower than those of the non-state-owned listed companies.From the perspective of the long-term healthy development of the market,government departments should reduce the intervention of state-owned listed companies so as to make the design of compensation contracts more marketable.