Incentive Effect of Executive Compensation under the Reform of State-Owned Enterprise System——Empirical Research

Abstract

The special characteristics of state-owned enterprises (SOEs) among group enterprises make the status of their executive compensation and incentive mechanisms a hot issue of academic interest. This study selects a sample of 653 domestic SOEs in China from 2010 to 2020, classifies them into four categories of SOEs: commercial, public welfare, central, and local, based on the perspective of SOE system reform, and conducts regression analysis using a fixed-effects regression model to explore the effect of executive compensation incentives in SOEs under mixed ownership reform. It is found that the pay incentives for executives of SOEs are conducive to the improvement of the comprehensive performance assessment indexes of the enterprises, accompanied by the reduction of the agency costs of the enterprises. Further research finds that there are disparities in the pay of executives of SOEs of different natures, and the effects of pay incentives also have different effects. Based on the current situation of SOE executives’ remuneration, the impact of executives’ remuneration incentive effect on the performance and cost of SOEs is quantified and analyzed, to enlighten the study of SOE executives’ remuneration incentive effect and find a realistic way of thinking to understand SOE executives’ remuneration incentive effect under the socialist environment with Chinese characteristics.