Relationship between Executive Compensation and Enterprise Performance of State Owned Enterprise: A Time Series Analysis from China

Abstract

Executive compensation of state owned enterprises in China has become an intense topic in public debates. Aforementioned studies have presented the relationship between executive compensation and enterprise performance. As unique and different from the previous studies, this paper aims to figure out a dynamical relationship between executive compensation and enterprise performance in the latest five years. For this purpose, we introduce panel data vector autoregression model into our research and collect data from wind database. Although there is a positive relationship between executive compensation and enterprise performance, the effect that salary acts on enterprise performance is descending by years, reversely, the effect that equity incentive acts on enterprise performance is going up by years.