| The report to the 19 th National Congress of the Communist Party of China pointed out that innovation is the primary driving force for development and a strategic underpinning for building a modernized economy.The Chinese economy is on the road to becoming an innovation-driven power driven by innovation and innovation development.And enterprise is an important force of innovation.As the decision-maker of the company’s business strategy,the executives’ behavior affects the long-term development of the company.Therefore,a good executive incentive policy helps enterprises to achieve innovative development.In keeping with the theme of The Times,the Chinese government is deepening the reform of stateowned enterprises,promoting innovation-driven development,and striving to create a favorable soft environment for enterprise development.In 2014,the Reform Plan of the Remuneration System for The Heads of Centrally managed Enterprises(hereinafter referred to as the Salary limit Order)was issued,and was officially implemented in batches from January 1,2015.The main content of the Salary limit Order is to limit the salary of the people who are administratively appointed to be in in charge of the enterprise,narrow the income gap within enterprises,and improve the current performance and sustainable development of enterprises in the medium and long term during the tenure of the management.Based on the research of domestic and foreign scholars,this paper makes an in-depth study on the impact of executive compensation on enterprise innovation by using the quasi-natural experiment of salary cap implemented in2015,and makes some exploratory work on measuring the effect of salary cap policy.The main achievements are as follows:First,this study confirms the effect of salary limitation.In this paper,the central enterprises that have not yet implemented the Salary limit Order are taken as the control group and the central enterprises that have implemented the Salary limit Order are taken as the experimental group to construct a multi-point DID model.The results show that the absolute compensation and internal compensation gap of the heads of central enterprises are significantly reduced after the implementation of the Salary limit Order,indicating that the Salary limit Order can effectively reduce the excessive compensation of the heads of state-owned enterprises,gradually reduce the executive compensation of central enterprises to a reasonable level and improve the internal pay structure of enterprises.Secondly,this paper explores how the pay structure affects enterprise innovation.According to the regression results,the Salary limit Order has a significant positive impact on the number of innovation applications of enterprises,and the output of innovation results of enterprises also increases after an average review period of three years.Although the Salary limit Order makes the explicit salary of the head of listed enterprises decrease significantly,it also makes the pay structure of enterprises more reasonable and fair.The new pay structure makes business leaders pay more attention to the long-term development of the enterprise.At the same time,on the premise that explicit compensation is limited,the attraction of political promotion is relatively increased,which makes enterprises pay more attention to long-term development and build their core competitiveness by increasing innovation.Under such circumstances,the heads of state-owned enterprises will increase R&D spending to increase their political promotion.Therefore,the reduction of executive compensation and the reduction of internal compensation gap can help enterprises to carry out innovative development.Thirdly,the results of heterogeneity analysis confirm that wage restriction has different effects on monopolistic and competitive industries.The effect of Salary limit Order and innovation effect are more significant in competitive enterprises,but not in monopolistic enterprises.Within competitive enterprises,the Salary Limitation Order makes the salary of the person in charge of the enterprise more reasonable.At the same time,the person in charge increases the R&D investment of the enterprise on the premise of pursuing the long-term goal,which is finally reflected in the increase of the number of enterprise innovation.Based on the above research results,this paper draws the following research enlightenment:First of all,reasonable executive compensation and reasonable internal pay gap are conducive to improving R&D investment level and innovation ability of enterprises.The government should regulate the executive compensation of enterprises,and enterprises should closely follow the government policies and make adjustment according to the actual situation of enterprises,so that the pay system can better match the talents of executives.Secondly,in terms of policy formulation,enterprise compensation policies can be rationalized according to the nature of enterprises.For competitive enterprises,executive compensation is linked to market performance and floats according to market conditions,while facing higher market competition.Therefore,the person in charge of the enterprise will excessively pursue the current salary without paying attention to the long-term development of the enterprise.Therefore,the remuneration of senior executives of competitive enterprises should be limited and be more reasonable,so that the person in charge of the enterprise can pay more attention to the long-term,stable and healthy development of the enterprise.For monopoly enterprises,we should relax their salary decision system,give full play to the independent ability of the person in charge of the enterprise to the greatest extent,and realize the long-term and healthy development of the enterprise.Finally,innovation input is an important source of innovation output,and R&D is the driving force for sustainable and healthy development of enterprises.Reasonable pay structure encourages enterprises to increase innovation input and thus increase innovation output,which indicates that the existing innovation output is not only limited by the efficiency of R&D,but also by the constraints of capital budget.Therefore,if profits allow,enterprises can moderately increase R&D investment to increase their core competitiveness. |
