十八色Regulation of Executive Compensation of SOEs:
Empirical Evidence from China Stock Market人物御龙帛画
Jianguang Hu Meng Xiao Siyu Jiang Peixin Wang*
Abstract：Executive compensation of state-owned enterpri is determined by market mechanism and regulated by policies of related government institution as well. Using shocking financial events to affect executive compensation of state-owned listed companies between the years of 2013-2014, the market reactions to the events are studied. It is found that as a policy of state-owned enterpri reform, it has a positive effect on the companies involved. And state-owned enterpris with a higher level of executive compensation are associated with a higher market reaction. This compensation limit policy is aneffective regulation.
黄苓的功效与作用Keywords: SOEs Reform; Executive Compensation; Regulation; Monte-Carlo Simulation
1 Introduction
Recently, the high level of executive compensation of state-owned enterpris (SOEs) and how to regulate it have drawn much attention from academic fields and some media. At the policy level, a guid
eline to deepen reforms of state-owned enterpris was relead by the Central Committee of Communist Party of China and the State Council in September 2015, which calls for “improving the compensation distribution and strengthening compensation information disclosure to improve corporate governance mechanism and other related issues.”① Meanwhile, “Decision on Major Issues Concerning Comprehensively Deepening Reforms” (DMDR) was adopted at the Third Plenary Session of the 18th CPC Central Committee, which propod state-owned enterpris should reasonably increa the proportion of market-oriented recruitment, reasonably determine and strictly regulate SOEs executive wage levels, position benefits, consumption and business spending. Thes regulation events imply that the regulation for SOEs executive compensation has far-reaching significance for a *Jianguang Hu, Meng Xiao, Siyu Jiang, Peixin Wang, Business School of Jilin University.
迷路①Jenn and Murphy (1990) believe that compensation of managers (CEO) is decided not only by contracts between
principals and agents but also by law, polices, media and employees.带绿字的诗句
护眼背景图片· 67 ·
Regulation of Executive Compensation of SOEs: Empirical Evidence from China Stock Market new round of state-owned enterpris reform.
The operations and governance of state-owned enterpris in the capital market are in accordance with market mechanism, and the management compensation contract should be a reflection of minimizing agency costs in the process of coordinating interests between shareholders and managers under the paration of ownership and management. On the other side, state-owned enterpris should also take into account multiple operating objectives, such as absorbing employment and fulfilling specific social responsibilities (Lin et al., 1998; Pan et al., 2008). Thus its profitability, to some extent, is bad on the exclusive posssion of national resources, which makes it reasonable for the government to regulate the executive compensation composition and executive compensation levels. Such regulations may be an effective modification of existing practices. It may also be an extreme limit to executive compensation level. Thus the effect of the regulation needs to be tested by the market reaction. This paper lects a ries of regulation policies for SOEs executive compensation between the years of 2013 and 2014 as shocking events in the financial market to analyze its impact on listed SOEs value using the event study method. Regression analysis and Monte-Carlo simulation are also ud to examine the impacts of related ev
ents on companies of different executive compensation levels. At the same time, we put forward further policy suggestions for SOEs executive compensation regulation.
2 Literature Review and Hypothesis Development
In the modern corporate system, the paration of ownership and management means shareholders cannot obrve managers’ actions directly and it is necessary to reduce agency costs through corporate governance mechanism (Grossman and Hart, 1983；Hölmstrom, 1979；Jenn and Meckling, 1976). To realize effective incentives, the ba salary of executives is generally determined by a few factors, such as industry, firm size and executive experiences, in practice. And the performance pay related to incentive partly depends on accounting earnings, stock prices and other relevant factors. From the perspective of corporate governance, compensation committee plays a specific role in the process of tting executive compensation. However, to some extent, the role of the compensation committee who function is relatively limited, is to determine the compensation strategy and to protect its implementation rather than to determine compensation levels (Murphy, 1999).
Generally, in the process of tting the levels and compositions of executive compensation, the mark入职军训
et mechanism has played a decisive role. As a new and transitional capital market, China state-owned listed companies have a certain particularity. As far as goals of state-owned listed corporations are concerned, in addition to the maximization of shareholder value, they undertake some other tasks, including absorbing local employment,大学三年的规划
