Research On The Relationship Between Executive Compensation And Business Performance Of Commercial Banks

In the process of modern business administration,the ownership and management rights are separated,and because of the incompleteness of the contract between the principal and the agent,the asymmetry of information,the difference of ultimate purpose and the difference of risk preference,the principal can not completely control the agent's behavior,thus the interests of the two can not be consistent.One way to solve this problem is to give the agent reasonable remuneration.Commercial Banks,as financial enterprises,also face the same problem.From the annual report information disclosed by some commercial banks,it can be seen that the executive compensation of urban commercial banks is superior to that of state-owned Banks and joint-stock Banks,and some of them even far exceed that of state-owned Banks and some joint-stock banks.Therefore,this paper chooses urban commercial banks as research object.In addition,executives have the right to operate commercial banks,so the decisions they make in the operation process largely determine the performance of Banks.From this perspective,executive compensation must be related to bank operation.Firstly,theoretical analysis and hypothesis based on literature.Based on a systematic review of relevant literature,this paper discusses the impact of executive compensation on business performance based on principal-agenttheory,optimal compensation contract theory and human capital theory,and proposes research hypotheses based on these theories.Secondly,case selection and introduction.This paper takes Bank of Beijing,Bank of Nanjing and Bank of Ningbo as examples to analyze the composition of executive compensation and level of business performance,and compares the executive compensation levels of the three listed city commercial Banks with those of state-owned banks and joint-stock banks.Thirdly,the analysis and comparison of the relationship between executive compensation and business performance.In this paper,the city of three listed firms from 2010 to 2017 annual report disclosure of financial data,business performance level as the profitability,liquidity,security,growth four aspects,choose the corresponding performance index factor analysis,extract the common factor to calculate comprehensive score business performance,and then to the empirical analysis,research the relationship between executive compensation and performance.After factor analysis,the selected indicators related to business performance and executive compensation are empirically analyzed to study the relationship between executive compensation and various indicators of business performance.In addition,this paper also selected the data of the five state-owned banks and eight joint-stock banks listed in China from 2013 to2017 as the control group and the data of the three listed urban commercial Banks from 2013 to 2017 for comparative analysis,and the analysis method was consistent with the three urban commercial banks.Finally,the research conclusion.On the basis of summarizing the whole paper,this paper puts forward corresponding Suggestions from four aspects of annual salary system,incentive mechanism of executive compensation,supervision by the board of directors and improvement of information disclosure,so as to provide ideas for Chinese banks to build a reasonable executive compensation system.