Research On The Relationship Between Executive Compensation,Corporate Social Responsibility And Financial Performance

In the era of globalized knowledge economy,competition among enterprises is also a competition for talent resources to a certain extent.The company's profitability and development prospects are closely related to the capabilities of senior executives.The employment and retention of corporate executives will be affected by whether the executive compensation is linked to the company's financial performance.Although the academic community has given high attention to executive compensation when conducting research on corporate governance,but most scholars study its economic effects from the aspects of the structure and influencing factors of executive compensation.Some scholars also study the impact of executive compensation on financial value from the perspective of enterprise scale and property rights,but few scholars analyze the relationship between executive compensation and financial performance from the path of corporate social responsibility.Therefore,from the perspective of corporate social responsibility,this paper mainly studies the following questions:(1)Does executive compensation have a certain impact on the financial performance of the company?(2)Does executive compensation have an impact on corporate social responsibility?(3)What is the relationship among executive compensation,corporate social responsibility and financial performance?Based on principal-agent theory,human capital theory,stakeholder theory and incentive theory,this paper selects 12946 financial data of A-shares from 2011 to 2016 as a research sample,empirically studies the impact of executive compensation on corporate social responsibility and corporate financial performance.The empirical results show that executive compensation significantly improves the financial performance of listed companies.This paper further confirms the high correlation between corporate social responsibility and financial performance,according to Wen Zhonglin's mediation effect model,it is found that executive compensation has an impact on corporate financial performance,part of the reason is that corporate social responsibility plays a role as a bridge,social responsibility can partly explain the mechanism of action between executive compensation and financial performance.Specifically,this paper takes executive compensation,corporate social responsibility and financial performance as the explanatory variable,mediator variable and explained variable of the study,and studies the relationship among the three.The main idea of this study is that the increase in executive compensation will affect the executives' decision-making activities on whether the company fulfills its social responsibilities and how to fulfill its social responsibilities,and this decision-making activity of executives will in turn affect the financial performance of the company.In order to test the relationship among executive compensation,corporate social responsibility and financial performance,this paper constructs three multiple regression models,referring to the research of previous scholars,while controlling a series of variables such as the size of the company,the proportion of independent directors,the nature of property rights,growth,the shareholding ratio of the largest shareholder,and the shareholding ratio of senior management.In order to test whether corporate social responsibility has a mediating role in the relationship between executive compensation and financial performance,this paper uses Wen Zhonglin's mediation effect model to test.Then,considering the long-term impact of executive compensation on financial performance,this paper takes the further analyzes with Tobin Q as a measure of long-term financial performance of the company.Finally,this paper examines the robustness of the conclusions of this paper from three aspects.Firstly,considering that there may be endogenous problems between executive compensation and financial performance,this paper uses the lag-based explanatory variable and control variables to conduct empirical research;then,in order to control the influence of factors outside the model,this study constructs the panel data random effect model and the fixed effect model,the construction of this model is helpful to estimate the decrease of bias;finally,the regression model is constructed by using ROE instead of ROA.This article covers six parts.The first part is the introduction.This part mainly expounds the background and significance,ideas and methods,content and framework,and possible innovations of the research.The second part is literature review.Through reviewing the related literatures on the structure and incentive effect of executive compensation,the relationship among executive compensation,corporate social responsibility and financial performance,this paper finds the focus of existing literature research and also finds the space that this paper can continue to study.The third part is the theoretical overview of the relationship among executive compensation,corporate social responsibility and financial performance.This part first expounds the concept of executive and executive compensation,then discusses the meaning and measurement of corporate social responsibility and financial performance,and finally elaborates the theoretical basis of this study.The fourth part is the empirical research design of this paper.This part firstly presents the relevant hypotheses of this study based on the theoretical analysis,and selects the research samples based on the research hypotheses and models.At the same time,it points out the source of the selected sample data,and then expounds the variables selected in this paper.Finally,the selected variables are included in the empirical model constructed in this paper for subsequent empirical analysis.The fifth part is the empirical analysis of executive compensation,corporate social responsibility and financial performance.The empirical content of this part mainly includes descriptive statistics,correlation analysis,multiple regression analysis,further analysis and robustness test.The sixth part is the main conclusions and related recommendations of this paper.Combined with the empirical results of the previous chapters,this part elaborates the research conclusions of this paper,and proposes countermeasures and suggestions for improving the executive compensation system from various aspects.Moreover,the article also points out the shortcomings and limitations of this paper,and gives prospect to future research.