Research On The Influence Of The Executive Compensation Fairness On Enterprise Performance

Most listed companies in China are reformed from state-owned enterprises.The phenomenon of state holdings is significantly common among listed companies in China.Since the reform and opening up,state-owned enterprises have always occupied a dominant position in the Chinese market,leading the direction of China's economic development.The state-owned enterprise is also regared as the benchmark in the current market economic system in China.The focus on executive compensation of listed company has increased recently.Serious subsequences have emerged such as the mismatch between senior executives' compensation and contribution,the increasing executives'compensation gap among different industries.These subsequences arouse public concerns about compensation fairness.Fairness is a crucial principle of executive compensation design which dramatically influences the behavior of individual,the sustainable development of enterprise and social stability.Currently,most academic researches of executive compensation design mainly focus on different aspects of executive compensation fairness such as executive internal fairness,external fairness and individual fairness etc.And research on the relationship between one aspect of fairness and enterprise performance.Therefore,we select state-owned liseted enterprise as our research sample.It is essential to combine the different aspects of executive compensation fairness and find out the general and individual impacts on the enterprise operational performance.By comparing the impacts of difterent dimensions of executive compensation on enterprise performance,the research intends to figure out the individual economic benefits to optimize the policy of executive compensation and give some practical suggestions to enterprise in order to increase their operational performance.Based on the previous study results,this research combines theoretical analysis and empirical research to analyze the impact of the executive compensation fairness on the enterprise performance though internal and external aspects.Firstly,clarifying the background,significance and scientific research method of this paper.Secondly,reviewing relevant literature and analyzing the effect of executive compensation's internal and external fairness on the enterprise performance in state-owned enterprise.Apart from that,the ownership concentration has a moderating effect in the impact of compensation equity on enterprise performance.Then,the research puts forward seven hypotheses,defines variables and builds the model.The paper used compensation gap to measure external fairness and additional compensation to represent the external f-airness respectively.This research took the 2014-2017 A-share state-owned listed companies as research samples and tested the proposed hypothesis through descriptive statistics,correlation analysis and multiple linear regression.Through empirical research,the research drew the following conclusions;Firstly,the positive additional executive compensation has a significant positive impact on the enterprise performance.And the relationship is consistent with equity theory,indicating that the compensation incentive mechanism is effective.There is no significant correlation between negative additional compensation and enterprise performance mainly because the trade-off between the positive effect of principal-agent theory and the negative effect of the equity theory.Secondly,the executive compensation gap has a positive impact on enterprise operational performance,which in line with the tournament theory.Thirdly,ownership concentration has a moderating effect in the impact of compensation equity on enterprise performance.The higher the ownership concentration is,the greater the impact of executive compensation fairness on enterprise operational performanceThe main innovation of the research is that considering all the executive,analyzing the information integrated by a variety of theories,discussing the influence of the executive compensation on the enterprise performance from both internal and external,in order to avoiding the partial and study in a more comprehensive way.However the sample size limit the accuracy of the result which should be expanded in further research,the index of executive compensation and fairness measurement still needs further perfection.