Correlations between Executive Pay, Equity Incentive and Corporate Performance: Empirical Analysis Based on Panel Data of China’s Listed Companies

Abstract

The global recession triggered by the subprime mortgage crisis in 2009 has aroused reflections over executive pay system. Domestic and foreign theorists have not yet reached a unanimous conclusion in their research on relationship between executive compensation incentives and corporate performance, especially correlations between executive pay and executive shareholding ratio and equity concentration degree. There also exist large differences in the empirical results. This paper, on the basis of reviewing the previous research results, takes component stocks of Shanghai 180 and Shenzhen 100 indices during 2007-2009 as samples and tests the correlations between executive pay, equity incentive and corporate performance of China’s listed companies through multiple regression analysis, which is of great significance to direct the practices in executive compensation system reform of China.