Foreign Exchange Risk Management And Executive Compensation

With the continuous promotion of the national "Belt and Road"initiative and "Made in China 2025" strategy,the development goal of our country from "the huge manufacture country "to" the powerful manufacture country" is becoming more and more clear.More manufacturing companies have adopted various Ways to go abroad and actively participate in the international competition and cooperation.The business activities of these enterprises involve more and more fields.Their foreign trades are more and more frequent and their trade scale is increasing.These factors make manufacturing enterprises inevitably face foreign exchange risk.After China's 721 exchange rate reform in 2005 and 811 exchange rate reform in 2015,the RMB exchange rate has become more and more market-oriented,more flexible and volatile.In recent years,Sino-US trade frictions often happen.The occurrence of these events have forced manufacturing enterprises to pay more attention to the active management of foreign exchange exposure faced by companies in order to avoid greater losses caused by foreign exchange risks,and it also reflect the importance of the company's management of foreign exchange risks.As one of the most important groups in listed companies,executives are the leaders of the company's management.The management of the company,especially the company's foreign exchange risk management need the efforts of executives and their decision.As compensation and reward for the efforts and decision of executives,executive compensation should also be worthy of attention.Only reasonable salary can retain talents and the level of salary directly affects the talent competitiveness of the company and then has a deep impact on the core competitiveness such as the management ability of the enterprise.Based on these background,this paper studied the relationship between foreign exchange risk management and executive compensation.At the same time,the moderating effects of corporate performance and leverage on the relationship between foreign exchange risk management and executive compensation are also studied.In addition,this paper further studied the relationship between foreign exchange risk management and executive compensation share and the moderating effects of corporate performance and leverage on the relationship between foreign exchange risk management and executive compensation share.After studying the relevant literature at home and abroad,this paper adopts the method of combining theory with empirical research.In the first part,the effects of foreign exchange risk management on executive compensation,the moderating effects of corporate performance and leverage are theoretically analyzed and expounded after studying relevant literature and then the corresponding assumptions are put forward.Then the empirical test method was used to verify the foregoing hypotheses.We selected the data of 945 listed manufacturing companies in China from 2008 to 2018 as the panel data.The panel data were tested by the two-way fixed effect model.In the concrete empirical test process,firstly,this paper mainly examine the impact of foreign exchange risk management on executive compensation.Secondly,we introduce enterprise performance and corporate leverage as moderate variables to study the moderating effect of corporate performance and leverage on the relationship between foreign exchange risk management and executive compensation.In addition,in order to further study,when we verified the foregoing three hypotheses,the paper also interspersed and considered the relationship between foreign exchange risk management and executive compensation share.After the empirical test,this paper analyzes and summarizes the empirical test results.The results show that:(1)foreign exchange risk management have a positive effect on the compensation they receive in the case of full sample enterprises and non-state-owned enterprises.Respectively.In the case of state-owned enterprises,this positive effect is not significant.In a further study,we found that foreign exchange risk management have a beneficial effect on the company's executive compensation share,which makes executive compensation account for a larger proportion of the total compensation of employees,and this positive effect is significant.But in the case of state-owned enterprises as the research object,this positive effect is not significant.(2)The better the firm's performance,the stronger the positive effect of foreign exchange risk management on their remuneration.In addition,we found in further research that corporate performance weakens the positive effect of foreign exchange risk management on executive compensation share,and corporate performance is a semi-regulatory variable.(3)The degree of corporate leverage weakens the positive effect of foreign exchange risk management on their remuneration.In addition,we found in a further study that the degree of corporate leverage has no moderating effect on the relationship between foreign exchange risk management and executive compensation share.Therefore,besides strengthening the management of foreign exchange risk,the company's owners and operators should strictly base on the operating conditions and operating environment of the company changed by the management activities of the executives when entering into remuneration contracts,so that the compensation paid by the enterprise can match the operating conditions and operating environment of the company changed by the executives' management activities in order to further promote the executives to more actively manage the foreign exchange risk faced by the company,promote the improvement of corporate performance and corporate value,and finally achieve the goal of maximizing the interests of the relevant stakeholders of the enterprise.The company operator can actively improve the performance of the enterprise and rationally formulate the capital structure of the enterprise,so as to strengthen the positive effect of foreign exchange risk management on their remuneration.