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An Empirical Analysis of the power industry executives of listed companies incentive pay

Author: GaoQian°°WeiJingHong From: www.yourpaper.net Posted: 2009-04-30 08:23:33 Read:
[Abstract] listed companies for the power industry, in terms of the performance of the company, company size, the total number of holdings of executives, the total number of state-owned shares on executive compensation impact assumptions, using the SPSS statistical analysis software to study. Confirmed that the corporate executive compensation and corporate performance, the correlation between company size, but the total number of holdings with executives, no significant correlation between the total number of state-owned shares.

Over the years, the unreasonable remuneration for senior executives of listed companies in China to participate in the distribution of human capital can not be in accordance with the principle of allocation of factors of production, resulting in lack of senior executives working enthusiasm and creativity, the operation of short-term behavior is more common, causing part of the listed company's financial position and operating conditions deteriorating, greatly damaged the interests of the majority of shareholders and the enthusiasm of investors, shaken the cornerstone of the securities market. Remuneration for senior executives of listed companies to rationalize the distribution of benefits relationship of the listed companies, to mobilize senior executives enthusiasm to protect the enthusiasm of the majority of the shareholders' investment, to achieve the sustainable development of listed companies and even the stock market has important practical significance. This article only the power industry executives of listed companies regarding remuneration empirical research.

First, the research hypothesis

Hypothesis 1: there was a significant positive correlation between annual returns and operating performance of the power industry executives of listed companies. Between information asymmetry and the uncertainty that companies face operating environment based on principal-agent theory, shareholders and executives, shareholders in order to prevent the agency problem will design an optimal compensation plans, and can be observed to performance indicators to determine the remuneration of senior managers, as much as possible linked to the manager's compensation and corporate performance, motivate executives to take the interests of the shareholders, senior managers to reduce agency costs and risks caused due to the risk of moral hazard and adverse selection, so that managers have sufficient power to improve the level of profitability, and ultimately increase returns to shareholders. Annual money income depends on the company's performance due to the company's executives and senior executives in order to maximize their own income, must work hard to improve the company's operating results, and make their own pay levels increased with the increase in accounting earnings.
Assumptions: annual remuneration levels and the size of the company there was a significant positive correlation between the power industry executives of listed companies. Rosen (1982) construct a theoretical model that the enterprise is a hierarchical organization, the firm's output decision by the management, supervision and production, the stronger the ability of managers control more lower staff human resources requirements in production. According to management theory, the larger the company, the more levels of management in the organization, executives control more resources, and every level of the difference in pay executives of large companies the chance to make it paid legalization. From the point of view of human capital, the expansion of the Company's enterprise complexity requires managers with higher management skills, so that companies would hire more high-priced managers. Therefore, the ability of middle and senior managers of large enterprises rent is much higher than small businesses, their remuneration was correspondingly more. A large number of domestic and foreign research (Kaplan, 1997, Baker, Jensen and Murphy, 1988, Weygand, 2000) found that the remuneration of senior management of the company will also increase with the increase in the size of the company, that is, when the size of the company increases, compensation for executive-level difference will also have a certain level of increase.
Assuming that: significant negative correlation exists between the proportion of state-owned shares in the power industry executives of listed companies annual remuneration and the capital of the Company, there is a significant negative correlation between the top two shareholders stake. Institutions of governance of listed companies in China in the widespread shareholding structure malformations, most of the state-owned shares have absolute control, and the state-owned capital has been the absence of state, this play undoubtedly inhibit the effectiveness of the incentives. Traditional "iron rice bowl" phenomenon due to China's income distribution system, the proportion of state-owned shares of the larger companies in the pay system design can not be completely to the market. Therefore, the greater the proportion of state-owned shares, the lower the level of remuneration of senior managers. The state shares a significant share in most of the electricity in the listed companies, which leads to power listed company executive pay levels are relatively low.
Hypothesis 4: power industry executives of listed companies annual pay their proportion of shares held are positively correlated. According to the principal-agent theory, when the executives do not own shares of the Company, they will avoid the higher risk and higher-yielding projects, and lower risk, less income; when executives owned company shares, they will invest in higher-yielding projects, so that their welfare and improve the level, so that the company's interests and individual interests are closely tied together. As executives continue to pursue their own value maximization, the more a long time when they hold shares in the company, they will treat the community of interests fighting, prompting an increase in profits, improve operating performance, resulting in higher salary-based compensation .

Second, the study design

(A) sample selection and data collection sources
The empirical study of 56 units to the listed companies in Shenzhen and Shanghai on December 31, 2005 issue of A shares of all the electricity industry as a research object, the remuneration of senior executives and business performance of the power industry listed companies in 2005 empirical test. Institute of sample data from the data published by the China Securities Regulatory Commission's website a summary of the annual financial report of the electricity industry companies and the huge influx of information disclosure of listed electric power company (some data directly to obtain some of the data had been processed calculated after income).

(B) variable selection and description
Many studies have generally Tobin's Q value (ie, the ratio of the company's market value and the replacement value of the assets of the company) to measure the value of the company. This paper argues that, because the stock prices of listed companies in China is a far cry from its value, and the replacement value of the assets of the company is also difficult to estimate the value of Tobin's Q does not really reflect the company's performance. Therefore, this article uses the company's ROE to measure a company's performance. Institute in pay digital and not with stock options, but only limited monetary annual remuneration disclosed in the annual reports of listed companies, including wages and bonuses. In addition, information is difficult to obtain due to the hidden income of executives, remuneration of senior executives in this study does not include this. For enterprise scale, we use the total assets of the company. In this study, in order to further study the Shares held by senior executives of the relationship between corporate performance and the state-owned shares on the remuneration of senior executives were set up executive ownership variables and the variables of state-owned shares. Shown in Table 1.

(C) model
According to the above assumptions, the author constructed the following model to an empirical test.
Y = ¶¬ 0 ¶¬ 1 X1 ¶¬ 2 X2 ¶¬ 3 X3 ¶¬ 4 X4
The ĘŔ earnings per share may be an accurate description of the share capital of the listed company's profitability, but it can not explain the profitability of the net assets, and the characteristics of the ROE contrary. Therefore, return on net assets as operating performance indicators.

(2) This article does not include executives of independent directors.
The formula beta i (i = 0-4) for the coefficient

Third, the findings and analysis

(A) sample descriptive analysis
I use SPSS statistical analysis software, sample data for each variable of data indicators for basic statistical analysis and calculation (see Table 2). Can be found from the table, the remuneration of the senior management of listed companies of China's electric power industry structure is irrational, the form of a single. The vast majority of senior management compensation is salary plus bonus, annual salary system rarely, for the West extremely common equity incentive compensation in the form, even in the most listed companies to facilitate the implementation of equity incentive, such incentives are still in a "vacuum" state. China's power industry executives of listed companies in the overall number of holdings is small, low stake, statistics show that the the executives overall mean of the number of shares is about six millionths, the overall number of holdings total share capital but also the highest proportion of 0.02%. It is noteworthy that the executives "zero holdings serious, the 56 listed companies as much as 53 executives stake to zero. In addition, the the executives pay gap between China's electric power industry companies, the highest average annual compensation of the top three executives of listed companies reached 86.67 million (stock code 000037), while the lowest was only 11,400 yuan ( stock code 000426). China's electric power industry 56 listed companies net assets yields a value of 7.013%, and earnings in general. The proportion of state-owned shares of the listed companies of China's electric power industry an average of 41%, accounting for about two fifths of the total share capital, similar to other regions.
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