The Impact Of Executive Incentives On Corporate Performance

With the continuous development of the market economy and the continuous improvement of the modern enterprise system,the separation of corporate ownership from operating rights has become a common phenomenon.The fundamental reason is that enterprises need professional talents to operate in order to achieve the goal of maximizing the value of the enterprise.The owner of the business owns property ownership and residual value claims,and delegates the daily operations of the business to professional managers for management,which results in a principal-agent relationship and brings some problems.Based on the assumption of a rational economic man,both the owner and the manager of the company will work hard to maximize their own interests,but the claims of the two are not exactly the same.As the client,the owner of the company pursues maximizing the value of the enterprise,while the manager wants more salary and leisure time,and the imperfection of the market economy system will lead to the phenomenon of asymmetry of information.In this case,As the agent's manager,in order to pursue his own interests,he may act against the principal's interests.In order to reduce the resulting agency costs and thus alleviate this contradiction,business owners have established an incentive-restraint mechanism,which closely combines the performance of the company with executive compensation,and adds an equity incentive mechanism to the compensation system We hope to maximize shareholder wealth through multiple incentive mechanisms.With the outbreak of the financial crisis in 2008,many companies closed down,and company executives' salaries were gradually exposed to the public eye.Especially in recent years,there is no shortage of "highly paid" topics in society,which has once again raised the issue of the gap between the rich and the poor,which can easily cause social unrest.The promulgation of the "Remuneration System Reform Plan for the Personnel in charge of Central Management Enterprises" in August 2014 and the "Measures for the Administration of Equity Incentives for Listed Companies" on August 13,2016 have provoked discussions on executive compensation again.More and more members of the public believe that excessive pay of company executives is difficult to match the growth of relatively low company performance,and began to question the inevitable link between executive incentives and company performance.Therefore,it is still necessary to further explore the relationship between executive incentives and company performance.However,the improvement of performance sometimes requires risky investment and management.In order to achieve the goals they pursue and maximize their own benefits,executives are more inclined to choose riskier projects and make risky investments when making business decisions.These opportunities may bring greater returns to the company,but It will also make enterprises face greater operational risks.Therefore,risk-bearing behavior plays an important role in the process of executive equity incentives to improve corporate performance.Based on this,this article will use operating risk in corporate risk as the starting point,explore the relationship between executive equity incentives,operating risk and corporate performance,and study the role of operating risk in the relationship between the three.Listed companies formulate an effective executive equity incentive mechanism to provide theoretical support to achieve the purpose of motivating and supervising executives,thereby improving the company's operating performance,and providing recommendations for effective internal governance of listed companies in China.Based on the principal-agent theory and incentive theory,this paper selects the data of China's A-share listed companies from 2014 to 2018 as a research sample.Based on an empirical test of the impact of executive incentives and operating risks on corporate performance,the company's size,capital structure,and property rights structure,Growth ability,and property rights are the controlling variables.The results of this study show that executive compensation and executive stock incentives have significant positive effects on the company's financial performance and market performance.Among the three executive incentive schemes mentioned above,The impact on the market-based indicator Tobin Q is greater than the impact on financial indicators ROA;the use of financial early-warning z-values for business risk agents has a negative correlation with currency compensation;only executive compensation incentives have an impact on company performance.The operating risks of enterprises play the role of intermediary variables.