Research On The Impact Of Executive Compensation On Firm Performance Under Media Attention

The importance of information has been widely recognized.Media is a medium of information and whether media coverage can affect enterprises is concerned by scholars.According to the principal-agent theory and the optimal contract theory,the executives pay should show a positive relationship with the firm performance.However,executive compensation and firm performance are not as ideal as the theoretical assumptions describe.Therefore,this article adds the media attention to the research on the relationship between executive compensation and firm performance,and explores the role of the media in corporate governance.According to the division standard by incident happen before or after,the role of media in corporate supervision and governance can be divided into ex ante deterrence and ex post exposure.Compared with ex post modification,ex ante deterrent function has more economic significance.Therefore,this article studied the relationship between media attention,executive compensation and firm performance base on ex ante role of media,and supplemented the theory of media governance role.With the regression analysis data of 9406 Chinese A-share listed companies from 2011 to 2015,the results show that the higher the level of media attention,the higher contribution of executive compensation to the firm performance,and media attention can reduce the agency costs.And negative media coverage can lead to more corporate governance effects than general media coverage and same as media bias does.Through theoretical analysis,we find that the factors that determine the success of media governance include the ability of the media to disseminate information,the credibility of the media,personal perception,media intonation,media bias and shame on the violation of social values.The mechanism of media ex ante governance is that the subject will calculate and imagine the economic and reputational consequences of the act being exposed by media before making a violation of corporate governance,and the rational person will stop the infringement behavior once the expected cost is greater than the expected return.