Abstract
The corporate governance mechanism is very important to solve the principal-agent problem effectively. Based on the particularity of the financial industry, this paper uses the panel data of 45 listed companies in China's financial industry from 2007 to 2015, the empirical results show that the degree of ownership concentration, the duality of CEO and chairman of the board and the independent directors proportion have a significant negative impact on executive pay, and the size of the board of supervisors has no marked impact on executive pay. The degree of ownership concentration has a significant positive impact on the pay-performance sensitivity, and the duality of CEO and chairman of the board, the independent directors proportion and the size of the board of supervisors have a significant negative impact on the pay-performance sensitivity. For the listed companies in the financial sector, they should pay attention to the executive pay disclosure system, the board of supervisors governance mechanism and the independent director system. We can use the degree of ownership concentration to improve the pay-performance sensitivity, and make corporate governance more effective.
Highlights
The incentive mechanism and the constraint mechanism are two "magic weapon" to solve the problem of principal-agent problem in modern enterprises
Hypothesis 1a: There is a negative correlation between ownership concentration and executive pay
Hypothesis 3a: There is a negative correlation between the proportion of independent directors and executive pay
Summary
The incentive mechanism and the constraint mechanism are two "magic weapon" to solve the problem of principal-agent problem in modern enterprises. In order to make executives and clients act in line with their goals, the former mechanism adopts the method of pay and enterprise performance, which can effectively prevent moral hazard of the manager, and make his behavior consistent with the principle of maximizing the interests of shareholders. The latter mechanism is designed to strengthen the supervision and control of executives through the function of the internal organs of the company, and reduce the possibility that executives can use their power for their own profit. This paper takes the data of 45 listed companies in the financial industry from 2007 to 2015, and studies the impact of governance mechanism of financial listed companies on the pay and the pay-performance sensitivity of executives
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