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Effect of Top Managers' Compensation Structure on Corporation Performance:an Empirical Analysis of Listed Companies in China

GU Hai-ying

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Abstract

The empirical analysis shows the structure of top managers' compensation has effect on EBIT(earning before interest an tax) and share price,but has little effect on ROE(return on equity) which is a traditional profitability index.A top managers' compensation structure comprises annual salary and stock option incentive can bring the managers' attention to both short-term target and long-run development,and reduce moral hazard.The study also indicates that the proper number of managers who get both annual salary and stock option incentive is important to improve management efficiency.

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What this paper is about

The empirical analysis shows the structure of top managers' compensation has effect on EBIT(earning before interest an tax) and share price,but has little effect on ROE(return on equity) which is a traditional profitability index.A top managers' compensation structure comprises annual salary and stock option incentive can bring the managers' attention to both short-term target and long-run development,and reduce moral hazard.The study also indicates that the proper number of managers who get both annual salary and stock option incentive is important to improve management efficiency.

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Available abstract

The empirical analysis shows the structure of top managers' compensation has effect on EBIT(earning before interest an tax) and share price,but has little effect on ROE(return on equity) which is a traditional profitability index.A top managers' compensation structure comprises annual salary and stock option incentive can bring the managers' attention to both short-term target and long-run development,and reduce moral hazard.The study also indicates that the proper number of managers who get both annual salary and stock option incentive is important to improve management efficiency.

Key concepts: Salary, Business, Incentive, Profitability index, Corporation, Equity (law), Capital structure, China

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