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Internal Personal Connections and Pay-performance Sensitivity of SME Board Company

【Authors】
TIAN Xiangyu, LI Ying & ZHANG Zhiwei
【WorkUnit】
Shanxi University of Financial and Economics
【Abstract】

The paper examines the impact of the personal connections between the general manager and chairman of the board on the compensation performance sensitivity of the firms in the small and medium-sized board from 2010 to 2014. The study shows that compared to non-personal relationships samples, the samples with a personal relationship have stronger executive compensation performance sensitivity. Secondly, considering how the pathway established, the compensation performance sensitivity is stronger in the samples which the personal relationships have been established by career paths than in the samples which the personal relationships have been established by non-career paths. Thirdly, pay performance sensitivity is stronger in the companies which performance has been enhanced than in the companies which the performance decreased. These results enriched the literatures of “the relationship and the manager incentive”, and the results can also encourage small and medium board listed companies to understand how to improve their incentive system on a relationship point.

 

JEL:G30, L14, M52

【KeyWords】
Internal Personal Connections, Career path, Payperformance Sensitivity