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Executives incentive pay empirical study of the impact on the performance of listed companies

Author: LiYuJun From: www.yourpaper.net Posted: 2010-06-15 11:36:40 Read:
Abstract: Logistic regression analysis, the relationship between the equity incentive and corporate governance performance incentive pay executives cash an empirical test. The study showed that executives cash incentive pay does not realize the company's value-added constitute a significant impact; opposite holds that the higher the proportion of the shares of a listed company executives in management, the listed companies to achieve the greater the probability of value-added .
Keywords: listed companies; executives; incentive compensation; performance

Listed companies need to develop an improved pay incentive contract constraints as the goal to maximize the interests of all shareholders and motivate executives to work hard, to avoid damage the interests of the shareholders for personal gain. In this paper, based on the characteristics listed company executives incentive pay, the Empirical Study executives incentive pay design on the performance of listed companies, trying to design rational management incentive model to provide a theoretical reference and practical reference for listed companies. This is to optimize the governance structure of listed companies in China to increase the wealth of shareholders of listed companies and investors to return to the capital market so as to promote the sound development of far-reaching practical significance.

1 executives incentive pay and the performance of listed companies Empirical Study

1.1 Empirical research design
1.1.1 Empirical research hypothesis
Executives of listed companies can be divided into incentive pay based on the company's surplus cash and equity-based incentive remuneration incentive incentive pay. The surplus-based managers to the Pay Formally shareholders may be more convenient to evaluate the behavior of managers, because managers can improve the surplus of the company is more likely to be observed, but substantially improved the company's surplus may be profit result of the manipulation. Reflected in the company's surplus is the result of managers past behavior, based on surplus cash pay will motivate managers to pursue short-term interests, when the surplus the results did not meet established requirements, managers have an incentive to manipulate profits to ensure their own The vested interests will not be jeopardized. The stock price reflects the expected future cash flows, equity incentive to establish a closer and direct contact between executive compensation and shareholder value, the managers' personal interests and the company's future value growth to connect which will motivate managers to consider the impact of its behavior on the future value of the company, prompting it to take a far-sighted behavior.
In view of this, the paper presents the following empirical hypotheses, namely:
H: executives cash incentive pay and equity incentives on the performance of the listed companies there is a different impact, compared with cash incentive pay, equity incentive can enhance the performance.
1.1.2 Empirical research methods
Valid empirical test of the assumptions of the study, this article attempts to build a logistic regression model, the variable cash remuneration and equity EVA as performance evaluation variables listed companies, executives incentive pay in cash and equity incentive set the proxy variables used The incentive variables affect the performance of listed companies in the regression analysis.

1.1.3 study variables set
Based on the empirical research ideas, set the following study variables used to build a logistic regression model, and an empirical test:
(1) listed companies to continue the evaluation of variables. This article Select Economic Value Added (Eco-nomic Value Added, EVA) as a proxy variable for the performance of listed companies. EVA is rooted in a basic concept of economics, the residual income (residual, income), are widely used in Western countries enterprises, to become one of the core indicators of performance management and incentive compensation evaluation system are investigated. In this study, by calculating the EVA study sample, the EVA samples greater than 0 defined as a value-added companies, EVA sample of less than 0 is defined as the unrealized value added company. The study therefore set a dummy variable Y, if the study samples of EVA is greater than 0, then Y is 1, otherwise, the Y value is 0. The reason is of such a set of variables used in this article Binary Logistic Regression module the statistical software SPSSl 1.5 in the analysis of sample data, SPSS software the default number of observations more sample assignment for a while in this study, EVA is greater than 0 sample mostly so set EVA is greater than 0, Y = 1. The EVA formula to:
EVA = net operating profit after tax cost of capital before interest
= Net operating profit before interest rates a total capital x WACC
The net operating profit after tax before the interest rate is adjusted by the profit and loss account, the total capital, including equity capital and debt capital; weighted average cost of capital is the weighted average calculated by the cost of equity capital and debt capital costs.
(2) The executives incentive pay in cash (CASH). According to the information disclosed in the annual reports of listed companies, the highest remuneration in listed companies reporting period the total remuneration of the top three management personnel as the base, the natural logarithm determined. The natural logarithm purpose is to eliminate the differences in sample observations dimensionless.
(3) The executive equity incentive (STOCK). Incentive for executives of listed companies in China, generally is the main cash incentive compensation. On January 4, 2006, the China Securities Regulatory Commission released a listed company equity incentive (for trial implementation), January and September of the same year, the SASAC has issued a state holding listed companies (outside) the implementation of equity incentive Trial Measures " and "state-controlled listed companies (domestic) for the implementation of equity incentive Trial Measures", making China's listed companies in the implementation of equity incentive to have a legal basis, but the implementation of equity incentive is still in the pilot listed companies, equity incentive data is not available yet, so. Proportion as the proportion of shareholdings in listed companies executives in management as a proxy variable equity incentive management shareholdings in listed companies in the number of executives, divided by the the executives total number of get variable assignment. Executives in this article refers to a listed company general manager, deputy general manager and chief financial officer, director of operations, constitute the executives disclosed in the annual reports of listed companies.

(4) the control variable. The same time, in order to control the annual systematic differences, the 2004 sample companies as the reference, set two virtual the variable YEAR05 YEAR06, when the observed sample is 2005, YEAR05 1, and 0 otherwise; When observing the sample belongs to the 2006 , YEAR06 1, and 0 otherwise. 1.1.4 Research sample selection
The 2004-2006 All listed companies in Shanghai and Shenzhen as primary samples. Then samples of primaries the following filters: The weed out the listed companies in the finance and insurance industry, as compared with other industries, the finance and insurance industry, the company's operating system has unique characteristics and accounting; removed when newly listed company public financing, company size and equity structure will greatly change, which makes the actual significance of the comparison of financial data before and after listing weakened; weed out all ST and * ST listed companies. After the above procedures, to determine the final study sample of 836 listed companies as of this article. This article sample data from the database of China's securities market (CCER) and CSMAR Chinese listed company financial database.
The 1.1.5 regression model
According to the study variables set above, this paper construct the following logistic regression analysis model for the empirical test of the assumptions of the study:
Logit (Y) 0 1 CASH 2 STOCK 3 YEAR_05 4 YEAR_06
Wherein: Y is: According to the study sample EVA is greater than 0 the study sample packet assignment;
0 , 1 , 2 , 2 , 4 : regression coefficients to be estimated;
: residual Xiang.
1.2 Empirical research results
Table 1 shows the characteristics of this study descriptive statistics of the variables. It can be found in all three years of observation samples 60.1% of the observed sample EVA> 0; management executives stake of up to 100%, at least for 0, with an average of nearly 20%.
Table 2 shows the results of the regression analysis. As can be seen from Table 2, the the equity incentive proxy variable STOCK regression coefficient for positive and for significant the test Wald2 statistic value of 5.194, P value of 0.045, at the 0.05 level of significance, the equity incentive proxy variable STOCK passed a significant test, the number of shares of the Company held by the executives in the management of listed companies the higher the proportion of listed companies to achieve the higher the possibility of added value; the cash incentive proxy variables CASH regression coefficient mainly , but for a significant test Wald 2 statistic value is 0.982, P value of 0.530, the significance level of 0.1, the study variables failed to pass significant test, that a listed company executives received cash the size of the incentive value of listed companies is no direct link between the value-added situation. In addition, the control variable YEAR_05 and YEAR_06 neither through significant test, show that there is no limit in the regression analysis, the annual systematic differences.
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