Management Power?corporate Performance And Executivecompensation

Since the Securities Act stipulates that listed companies have obligations to disclose information of executive compensation in their annual reports,the phenomena of executives "sky-high price" compensation frequently occurs.Growth rate of the compensation by some executive is higher than that of corporate profit.It is common that pay and reward are in disproportion,so-called "pay mystery",which raises doubts about the compensation incentive effect.As a type of important human capital,research has shed light of the issue of executive compensation.However,how to implement effective compensation mechanism has become a difficult corporate governance issues for listed companies in China.The existing literature has found that most of studies have focused on the correlation between executive compensation and corporate performance,namely,the sensitive relationship between compensation and performance.However,the studies rarely examines the role of managers played in contract design,that is,the effects of the managerial power on the compensation and performance.In fact,as an institutional arrangement,the impact of the managerial power on development of enterprise and compensation shall not be ignored.Based on transitional economy like China,this study uses the data of Shanghai &Shenzhen listed companies from 2010 to 2015.The study is built upon the principal-agent theory,the optimal contract theory,and the theory of managerial power,and it develops the research hypothesis.On the basis of studying and summarizing previous research,it uses several research techniques such as factor analysis,descriptive statistics,correlation analysis,regression analysis,robustness analysis,and so on to examine the relationship between corporate performance and executive compensation of listed companies in China from the perspective of managerial power.The results are as follow: First,executive compensation is positively correlated with corporate performance.And private enterprises are more sensitive to the changes of corporate performance than state-owned enterprises.This suggests that the most contract theory still apply in China.Furthermore,I use the factor analysis method to construct the comprehensive index for managerial power,and to study the relationship between managerial power and executive compensation.I find that power disposition has important influence on the executive compensation.Second,managerial power is positively correlated with executive compensation.And the effect of managerial power on executive compensation in private enterprises is more significant than that of state-owned enterprises.At the same time,it discusses the relationship between performance and salary from the perspective of managerial power.Third,Managerial power has a significant inhibitory effect on the positive relationship between corporate performance and executive compensation.Managerial power,to a certain degree,increases the executive compensation,also weakens the positive relationship between corporate performance and executive compensation.Compared with state-owned enterprises,managerial power exerts more obvious inhibitory effect on the positive relationship between corporate performance and executive compensation in private firms.This study uses the empirical analysis to study the role of managerial power played in the relationship between corporate performance and executive compensation.In addition,it explorers how the relationship may vary among the firms with different ownership,which has important research significance.In conclusion,the study has certain enlightenment significance for optimizing the design of executive compensation contract and increasing corporate performance.