External Fairness Of Executive Compensation,Investment Efficiency And Company Performance

As the company's main decision-makers,executives hold the main investment decisions and governance in the company's production and operation,which plays a vital role in the company's operation and development.The separation of ownership and management rights is a feature of modern companies.The resulting inconsistency and information asymmetry have led to an increase in agency costs.Salary incentive is an important means to reduce agency costs.The self-interest behavior of executives is restricted by the compensation system,which makes the goals of executives and owners tend to be consistent.The effectiveness of the compensation contract is whether the executive compensation system has a corresponding incentive effect,which affects the behavior of the executives,which in turn affects the company's performance.An external measure of compensation design is the pay gap,and whether it has an incentive effect can be used as a basis for judging whether the company's compensation system is reasonable.At present,the research on the incentive effect of executive pay gap is mainly concerned with the relationship between executive pay gap and company performance,but this direct research on the relationship between the two ignores the existence of intermediary effect.At present,the academic research on the fairness of executive compensation mainly focuses on the internal fairness of executives and pays less attention to the external fairness of executives.Most of the research on the external fairness of executives is based on the theory of tournaments.In the content of this paper,the author firstly combs and summarizes the literature on the relationship between the external fairness of executive compensation and investment efficiency,the performance of the company,and the investment efficiency as a mediator.At the same time,combined with the research ideas of this paper,the principal-agent theory,fairness theory and social comparison theory are expounded.Secondly,the social status quo of unfair pay is taken as the research background,and the research ideas and methods of scholars are used to refer to the principal-agent theory.As a theoretical basis,the theory of fairness and social comparative theory put forward three research hypotheses: Hypothesis 1:(H1a)executives are positively related to the company's performance;(H1b)executives are responsible for the extra compensation and company Performance is a negative correlation;Hypothesis 2:(H2a)executives are positively related to investment efficiency and investment efficiency;(H2b)executives' negative compensation is negatively correlated with investment efficiency;Hypothesis 3:(H3a)In the executive's positive extra compensation,the impact of investment efficiency intermediary executives' extra compensation on the company's performance;(H3b)In the executive's negative extra compensation,the impact of investment efficiency intermediary executives' extra compensation on the company's performance.Finally,based on the 2010-2017 data of China's Shanghai and Shenzhen A-share listed companies,a regression model was established for empirical research.The results show that:(1)In the executive's positive extra salary,the greater the extra salary gap,the higher the investment efficiency,the more beneficial to improve the company's performance,and the intermediary effect of investment efficiency is verified;(2)in the executive In the negative extra salary,the greater the extra salary gap,the more unfavorable the company's performance improvement,and the intermediary effect of investment efficiency as a mediator variable has not been verified.At the same time,we know that investment can be divided into efficiency investment and non-efficiency investment.Non-efficiency investment is divided into over-investment and underinvestment.The improvement of investment efficiency can be achieved by suppressing excessive investment or stimulating insufficient investment.Therefore,based on the above research conclusions,this paper further divides the investment efficiency into over-investment and under-investment,and further studies and analysis finds that in the executive's positive extra compensation,the investment efficiency is improved by suppressing excessive investment.Realized,and the situation of insufficient investment has not improved.Finally,based on the research results of this paper,the corresponding suggestions are put forward.