On The Relationship Between Executive Compensation And Firm Performance From The Perspective Of Managerial Power

Separation of corporate ownership and management rights creates agency problems.Compensation contract,which is an important governance mechanism to alleviate traditional agency problem,has always been a key and difficult issue in corporate governance,as well as a public attention.However,the practice and academia have become doubted of the incentive effect of executive compensation contract as the executive compensation continues to set a new high record and some have nothing to do with the corporate performance.Based on the foregoing facts and the contingency theory and the management power theory,this paper integrates the managerial power into the study of the relationship between executive compensation and corporate performance so as to explores the influence of managerial power on the incentive effect of executive compensation contract.This paper selects data of all A-listed companies in China's Shanghai and Shenzhen Stock Exchanges during 2012 to 2016,and uses single formal managerial power variables and managerial power comprehensive indicator that is constructed by principal component analysis method to complete the empirical analysis by panel data regression,endogenous test and robustness test finally.The main conclusions of this paper can be drawn as follow:(1)There is a significant positive correlation between executive compensation and corporate performance,and the optimal contract still has certain effectiveness in China.(2)There is a significant positive correlation between managerial power and company performance.Proper managerial power does good to improve company performance effectively.(3)Managerial power has a negatively moderating role on the relationship between executive compensation and company performance.Managerial power will,to a certain extent,suppress the incentive effects of executive compensation.(4)There are differences in the influence of managerial power on the incentive effect of executive compensation between listed companies with different equity nature.