Research On The Influence Of Executive Compensation On Dynamic Adjustment Of Capital Structure

The issue of capital structure is the focus of the company's daily operations.Capital structure theory research has always been one of the focuses of research in the financial and economic fields.However,the phenomenon that the capital structure of listed companies deviates from the target capital structure is widespread,which affects the realization of the company's value maximization goal.The rational approach is to adjust the actual debt level to the target level.However,the adjustment of the capital structure is not a one-step process,and it needs to undergo a certain adjustment process.Therefore,it is particularly necessary to study the dynamic adjustment of the capital structure.The existing literature on the dynamic adjustment of capital structure is mostly based on the assumption that shareholders and executives have the same interests,but the principal-agent problem between shareholders and executives is widespread in modern enterprises and cannot be ignored.In recent years,academic research has found that agency conflicts have an impact on the dynamic adjustment of capital structure,while executive compensation is an important governance mechanism to ease agency conflicts.Therefore,executive compensation has a certain relationship with the dynamic adjustment of capital structure.With the exposure of executives' annual salary,the call to lower executive pay is constantly.However,blind salary cuts may aggravate agency problems,which in turn affect capital structure decisions.Therefore,it is necessary to explore the relationship between executive compensation and dynamic adjustment of capital structure,and provide a theoretical basis for the reality.Domestic research on the relationship between the two mostly studies only the impact of executive compensation on the process of capital structure adjustment,while ignoring the investigation of the effect of capital structure adjustment,and the discussion of the impact mechanism is relatively simple.Therefore,based on the above-mentioned realistic and theoretical background,this paper comprehensively studies the impact of executive compensation on the process of capital structure adjustment and adjustment effect,broadens the theoretical perspective of research,and further explores the impact mechanism of the relationship in different debt levels and different property rights.Differences,analysis and discussion of the results of empirical research,in order to propose countermeasures in a targeted manner.This article uses normative research and empirical research methods.Firstly,it reviews the relevant literature on the factors affecting the dynamic adjustment of capital structure and the relationship between executive compensation and capital structure,and summarizes the literature.Then define the main concepts and make research hypotheses based on the theoretical basis of the dynamic trade-off theory of capital structure.Then select the data of Shanghai-Shenzhen A-share listed company from 2006 to 2017 as a sample,and demonstrate the impact of executive compensation on the dynamic adjustment of capital structure through descriptive statistics,variable correlation coefficient test and multiple regression analysis.Different methods are used to test the robustness and verify the reliability of the conclusion.The research results show that it is a significant positive correlation between executive compensation and capital structure adjustment speed,and there is a significant negative correlation between executive compensation and capital structure deviation.When distinguishing between different debt levels,in the enterprises with excessive debts,the effect of increasing executive compensation on speeding up the adjustment of capital structure and reducing the deviation of capital structure is more significant.When distinguishing the nature of different property rights,the effect of executive compensation on the adjustment of the capital structure of non-state-owned enterprises is more obvious than that of state-owned enterprises,but the adjustment effect of non-state-owned enterprises is not as good as that of state-owned enterprises.Finally,combined with the previous research results,this paper proposes countermeasures in a targeted manner,hoping to provide some reference for the design of executive compensation system,the optimization of capital structure and the decision-making of capital structure of different property rights.