Executive Change And Pay-for-performance Sensitivity

In modern society,because of the change of external macro environment and the influence of internal management decision,executive change is common.Executive change reflects the change of enterprise's right center,which is one of the important strategic decisions of the enterprise.The mechanism of executive change is an effective mechanism to restrain the succession of senior managers.Stakeholders such as investors,creditors,suppliers,customers,the public and the government regard executive change as a signal of the future operation and development of the company.Executive change is a complex process,which consists of two successive events:the former departure and the successor succession.If the replacement of incompetent executives is the "elimination of the old" of the board of directors,then the establishment of successor executives is the "establishment of new" of the board of directors.The succession of senior executives shows that the management and decision-making power of the enterprise have changed,which makes the enterprise deeply affected,and the impact will eventually be reflected in the company's performance.Whether the corporate governance mechanism is effective is reflected in whether the company can hire suitable successor executives and dismiss the original incompetent executives when the company's performance is poor.The performance-based compensation contract is one of the important mechanisms to solve the principal-agent problem,which links the performance of the company with the compensation of the senior managers,encourages the senior managers to maximize the wealth of shareholders while pursuing their personal interests,and improves the value of the enterprise.Exploring the relationship between executive change and executive pay-for-performance sensitivity is a "window" to observe whether corporate governance mechanism is effective.Executive change not only directly affects the future business development strategy of the enterprise through the selection and appointment of successor executives,but also indirectly affects the business development of the enterprise through influencing the expectations of stakeholders for the enterprise.What are the economic consequences of executive change for listed companies?Is the executive pay-for-performance sensitivity improved?Based on the above background,it is of great significance to study the impact of executive change on executive pay-for-performance sensitivity.The theoretical significance of this paper is to enrich the literature on the economic consequences of executive change in listed companies,and to study the impact of executive change on executive pay-for-performance sensitivity from the perspective of the nature of property rights and the source classification of successor executives.On the one hand,the practical significance of this paper is to provide new ideas for the listed companies to regulate the behavior of executive change.On the other hand,it is helpful to provide suggestions for enterprises to improve the compensation contract based on the perspective of executive change.Based on the analysis of the basic theory,this paper takes the data of listed companies from 2007 to 2017 as the research object,examines executive pay-for-performance sensitivity from the perspective of executive change,understands how executive change affects executive pay-for-performance sensitivity,and lays a theoretical foundation for improving the compensation mechanism,governance structure and promoting the value of the company.This paper consists of the following six parts:The first part is the introduction.This paper expounds the motivation and significance of the topic,introduces the research content and methods,and finally puts forward the innovation.The second part is literature review.This paper reviews the literature from two dimensions of executive change and executive pay-for-performance sensitivity,and analyzes and collates the literature review.The third part is the theoretical analysis and research hypothesis.Based on the principal-agent theory,information asymmetry theory and optimal compensation contract theory,the research hypothesis is put forward.The fourth part is research design.This paper introduces the sample selection,data source,variable definition and model design.The fifth part is empirical analysis.Firstly,descriptive statistics are carried out for the sample data.One is descriptive statistics for the whole sample,and the other is descriptive statistics for the comparison of state-owned samples and non-state-owned samples.Secondly,we test the correlation of variables.Finally,the paper analyzes the impact of executive change on executive pay-for-performance sensitivity,the impact of executive change on executive pay-for-performance sensitivity under different property rights,and the impact of different sources of successor executives on executive pay-for-performance sensitivity from three perspectives of multiple regression analysis,and conducts robustness test and further analysis.The sixth part is the conclusion and suggestion.At the end of this paper,the limitations and shortcomings of this study are explained,and the future research direction is pointed out.The empirical results show that:(1)there is a positive correlation between executive change and executive pay-for-performance sensitivity.(2)Compared with state-owned enterprises,non-state-owned enterprises have more significant effect on executive pay-for-performance sensitivity.(3)Compared with the change of internal successor executives,the change of external successor executives has a more significant positive correlation with executive pay-for-performance sensitivity.(4)Compared with non-mandatory executive change,mandatory executive change has a more significant positive correlation with executive pay-for-performance sensitivity.The innovation of this paper lies in two aspects:(1)at present,the research on the relationship between executive change and executive pay-for-performance sensitivity is not rich,and its specific impact path need to be further studied.Combined with the special system background of our country,the research on the executive change and executive pay-for-performance sensitivity in listed companies of our country will help us to understand the trend of the change of executive pay-for-performance sensitivity after the change of senior executives,and provide theoretical basis and empirical evidence for the follow-up research on the executive change and executive pay-for-performance sensitivity.(2)This paper classifies executive change from the source of successor executives,and studies the impact of different sources of executive change on executive pay-for-performance sensitivity,in order to explore the impact of executive change on executive pay-for-performance sensitivity more comprehensively,and better understand the impact mechanism of executive change on executive pay-for-performance sensitivity.