Executive compensation affects firms performance4000字Word文档格式.docx
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Executive compensation affects firms performance4000字Word文档格式.docx
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3.0Dataandmethodology8
3.1Datacollection8
3.2Methodology9
4.0ResultsandAnalysisofdata10
4.1Thedescriptivestatisticsanalysis10
4.1.1Thedescriptivestatisticsanalysisoffirm’sperformance10
4.1.2Thedescriptivestatisticsanalysisofexecutivecompensation11
4.2Thecorrelationanalysis13
4.3Theregressionanalysis17
5.0Conclusionandfutureresearch28
5.1Conclusion28
5.2Thefutureresearch29
Reference30
Executivecompensationaffectsfirm’sperformance
Abstract
Executivecompensationplaysanimportantroleinthesustainabledevelopmentofenterprises.Andthispaperwillfocusesontheanalysisoftherelationshipbetweenexecutivecompensationandfirm’sperformancethatinfluenceprofitabilityandthecompetitiveadvantages.ThroughthetheoryanalysisandtheempiricalresearchbasedonSPSSstatisticalsoftware,thispaperteststhenullhypothesisandthetestingresultsfindoutthatthereisnoasignificantrelationshipbetweenCEO’stotalcompensationandECOageandcorporateperformance.Besides,thisvalidityandreliabilityshouldbestrictlytestedintheeffectiveresearchapproachinthefutureresearchthatshouldpaymoreattentiontotheimprovementofthisresearch.
1.0Introduction
Thegoalofthisresearchpaperistoanalyzeandtestthenullhypothesis,inwhichsometestingvariablessuchastotaldebt,leverage,CEObonus,CEOages,returnonassetsetc.aredefinedbytheSPSSanalysisprocess.Executivecompensationisacomplexandcontroversialsubjectwhichcatchesawidespreadpublicandmediaattentionforlongtimes(Niu,F.F.,2006).Thereisanobvioustrendthatoverthepast30yearstheCEOpayrisesubstantially.Forexample,BebchukandGrinstein(2005)observetheS&
P500firmsandgettheresultthataverageCEOcompensationunderanincreaseof146%whichsoaredfrom3.7milliondollarin1993to9.1millionin2003,whiletheaveragecompensationoftop-fiveexecutivesrocketedfrom9.5milliondollarin1993to21.4milliondollarin2003withanincreaseof125%.Thishassparkedaseriesofempiricalandtheoreticalresearchesaboutthenatureofthepay-settingprocessandtheoutcomeitproduces.Academicstrytofindappropriatereasonstoexplainthesoarofexecutivecompensationindifferentaspects.Somearguethatpowerfulmanagerssettingtheirownpaylargecausetheincreasingexecutivepaypackages.Othersinterpretitastheresultofoptimalcontractinginacompetitivemarketformanagerialtalent(MartinJ.Conyon.2006).Otheropinionssuchasthefirmsize,compensationconsultantsystem,etc.Theprevailingopinionisprincipal-agentmodel,itattributesthehighCEOpaytothecorrespondentincreasingfirmperformance.Indetail,shareholdersdesignacontractandmakeanoffertoCEOs.ShareholderstrytodesignoptimalcompensationpackagestoprovideCEOsincentives(Muslu,V.,2007).Thepurposeofexecutivecompensationistoalignthemutualinterestofprincipalsandagentstogethertoameliorateamoralhazardproblembyusingstockoptions,restrictedstock,andlong-termcontracts,motivatingtheCEOtomaximizefirmvalueaccordingtoagencytheory.However,doestherapidincreasesexecutivepayincreasetheshareholderwealthcorrespondingly?
DoesthehighlevelofCEOpayresultsinthebetterperformancesaswell?
Top100companiesinUnitedStateswereselectedfromThomsonOneBankerandOsiriswhichwillsupportmystudy.BasedontheresearchofCEOcompensationandcorporateperformance,Iwilltestthreehypotheseswhichare:
1.Thereispositiverelationshipbetweenthecompanyperformanceandexecutivecompensation.
2.Firm’svalueisrelatedtoCEOexperienceandCEOage.
3.Firmsizeaffectsexecutivecompensation.
Theremainderofthepaperisorganizedasfollows:
Section2providesthereviewofrelatedpriorliteratures.MethodologyispresentedinSection3.Section4includesfindingsweobtained.ConclusionsareexplainedinSection5.
2.0Literaturereview
Wemainlyreviewthepriorliteraturesconcerningtheproperreasonsexplainingtherapidincreasingofexecutivecompensationsandresearchtherelationshipbetweenthecompensationandfirmperformance.
HayesandSchaefer(2009)developamodelwherenofirmwantstoadmittohavingaCEOwhoisbelowaverage,andsonofirmallowsitsCEO'
spaypackagetolagmarketexpectations.Thecombinationoftypicalglamourcharacteristics(highreturnsandhighoperatingperformance)combinedwiththepublicize“allure”ofthefirmsthatcanaffordtopaythebest,andaninabilitytodistinguishluckfromskill,maypromptinvestorstooverreacttothesefirms,resultinginanegativerelationbetweenCEOpayandfuturereturns.Thus,ifCEOoverconfidenceisincreasinginpay,andifinvestorsarenotfullyawareofpotentialshareholderwealthdestroyingactivitiesoftheoverconfidentCEO,thissuggestsanegativerelationbetweenCEOincentivepayandfuturefirmreturns(Ben-David,Graham,andHarvey,2008,MalmendierandTate,2005,2008,2009).MichaelJ.Cooper,HuseyinGulenandP.RaghavendraRau(2009)alsoconcludethatthenegativerelationbetweenincentivecompensationandstockperformance.Theirresultssuggestthatmanagerialcompensationcomponentssuchasrestrictedstock,optionsandlong-termincentivepayouts,thataremeanttoalignmanagerialinterestswithshareholdervalue,donotnecessarilytranslateintohigherfuturereturnsforshareholders.
Besides,manypreviousstudieswererelatedtoTobin’sQdevisedbyJamesTobinofYaleUniversitywhoindicatethatQratioiscalculatedasthemarketvalueofacompanydividedbythereplacementvalueofthefirm'
sassetsandalsousedtoanalyzewhethermanagerialequityincentivesaffectcompanyperformancevalue.Moreover,Kim.EandLu.Y(2011)pointedthat“FirmvaluationismeasuredbyTobin’sQ,thesumofthemarketvalueofcommonstocksplusthebookvalueoftotalliabilitiesdividedbythebookvalueoftotalassets.”Inaddition,Morcketal.(1988)consideredthatfirmvaluewilldecreasewithmanagerialownershipifmanagersownbetween5%and25%,increaseifmanagersownbetween0%and5%,andalsoincreasewhiletheholdingsareabove25%.However,intermsoftherelationshipofCEOcompensationandthefirm’sperformance,Kim,EandLu,Y(2011)suggestedthatitiscriticallyrepliedonthestrengthofexternalgovernance(EG),forexample,inUSmarket.Andthisrelationwouldbehump-shapedwhenEGisweak,butwouldalsobeinsignificantwhenEGisstrong.Thisistosay,CEOownershipaffectsfirmvaluebyexaminingR&
D,whichisdiscretionaryandriskywhileCEOownershipsimilarlyexhibitsahump-shapedrelationwithR&
DwhenEGisweak,butnorelationwhenEGisstrong.(Kim,EandLu,Y2011)
Duringthistime,althoughmanystudiesattemptofexplainwhyCEOpayhasgrownsomuch,littleinsighthasbeenfocusonthepaydistributionofexecutiveteams.Bebchuketal(2007)pointedoutthat:
“weneedtounderstandthepaydistributionbecausetheriseinCEOpaycanbeanincreaseinthetotalcompensationgiventothetopexecutiveteamoranincreaseintheCEO’sfractionaspartofthetotalexecutiveteampay.”,whichexploredthepaydistributionandstructureofanexecutivecompensation.
GregorioSá
nchezMarí
n,AntonioAragó
nSá
nchez(2003)analyzethelinksamongexecutivecompensation,afirm’sstrategicorientation,andfirmperformance.Anumberofkeyquestionsrelativetotherelationshipsamongtheseelementsremainunansweredbecausepriorresearchonthissubjecthasreportedmixedresults,and,moreover,hasbeenconfinedalmostexclusivelytoU.S.firms.Wedevelopaframeworkthatdrawsonargumentsfromagencytheorytoidentifysuchlinks.Aresearchdesignwithbotharchivalandsurveydataisusedtotesthypothesesinasampleof253Spanishcompanies.Wefoundthattopmanagers’compensationsystemsarelinkedwithafirm’sstrategicorientations,butinadifferentformthanthatofpreviousstudies.Resultsshowtwodifferentiatedgroupsoffirms:
(1)prospectivefirmsthatadapttheirmanagerialcompensationsystemstotherequirementsofstrategiccontext,consequentlyobtainingpositiveperformanceeffects;
and
(2)conservativefirmsthatdesignmanagerialcompensationsystemsindependentofstrategiccontext,consequentlynotobtainingadditionalperformancebenefits.
ShenLiangjunandLiuLin(2010)basedontheliteratureofagencytheoryexplanationforfirm,theirpapertriestopromoteourunderstandingonthediversificationofthelistedChinesecompaniesintwoways.First,takingcontrolofthetopmanager'
sincentiveimpacts,theirpaperpreventstheomittedvariableproblemintheempiricalmodel.Second,thispaperusesthefixedeffectmodelofpaneldatatoestimatediversificationdiscount,sothattheirpaperalsocontrolsthefirms'
heterogeneityproblem.Theirpaper'
sempiricalresultssuggestthatthefirm'
svaluehasanegativerelationtofirm'
sdiversification,buthasapositiverelationtotopmanagers'
incentive.
YaoWeifeng(2011)aimstostudytheIRandtherelationshipbetweenIRandthecorporationvaluebasedonself-examinationreportdatumofChina’slistedcompaniesreleasedin2007.TheresultsindicateIRconsistsofthreemainfactors,namely,theunidirectionalinformationtransmissionfactor,thebilateralcommunicationfactorandtheorganizationfactor.AndtheresultsalsoshowthatinthecapitalmarketofChina,IRissignificantlypositivelycorrelatedwiththecorporationperformance,especiallybilateralcommunicationfactor.Itconcludesthatthebilateralcommunicationfactorwillplayakeyro
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