关键词: 融资融券, 高管薪酬, 薪酬业绩敏感性, 公司治理, 双重差分模型

Abstract:  The impact of financial market on the real economy is one of the most important problems in financial economics. The securities margin trading was officially launched in China on March 31, 2010, which end the history of “unilateral market” in China′s capital market. As a financial innovation tool, the implementation of margin trading system is one of the most important reforms in China′s capital market in recent years, and is regarded as a booster to promote the effective development of China′s capital market. Extant domestic research mainly focus on the impact of margin trading on the efficiency of financial market. More importantly, the reform of the secondary financial market should also have a profound impact on the real economy, but this string of literature is still lacking. Our study will explore the governance effect of margin trading from the perspective of executive compensation.Working as the core mechanism of corporate governance system, executive compensation system is designed to reduce the agency problem, and hence improve the performance and wealth of shareholders. How to improve the compensation contract effectiveness is of great importance for the firms. According to the theory of optimal contract, a compensation system that link to the performance could help to motivate managers to work hard, which is also the optimal equilibrium when the monitoring cost is very high. However, an effective compensation system needs high-quality performance indexes. High quality means that the index is a performance measurement with low noise and could track the managers′ efforts accurately. Previous studies find that the margin trading can improve the information efficiency, information content and earnings quality of the individual stock market price, indicating that the basic indexes on which executive compensation contracts depend will become more effective. Therefore, the executive compensation contract could become more effective after the introduction of margin trading, and the contract should put more weight on the performance indexes.Therefore, this paper takes the margin trading system which started in 2010 as a natural experiment opportunity, and uses the difference-in-difference model to investigate the margin trading′s impact on executive compensation contract. We try to answer the following questions: (1) does margin trading improve the effectiveness of compensation contracts? That is, whether the accounting information sensitivity and market performance sensitivity of executive compensation will be improved? (2) Working as a new form of governance tool, how will margin trading play its role? Is it an competitive or complementary system with other governance mechanisms?Firstly, with focus on the accounting performance indexes and development of market economy system, the accounting performance-based compensation system is widely used in Chinese enterprises, since the accounting performance directly reflects the manager′s decision-making consequences. Due to their high availability and strong measurement ability, the accounting performance indexes constitute the main indexes to evaluate the manager′s performance, but the defect is that earnings data are easy to be manipulated by the management. The introduction of margin trading mechanism can effectively improve the quality of accounting performance. First of all, after the introduction of margin trading in China, the earnings management level and the probability of financial restatement are significantly reduced, demonstrating that the earnings quality of listed companies significantly improved. Secondly, the threat of short selling brought by margin trading will encourage the executives to disclose the company′s bad news before the market to reduce the “angry cost” of the public, thus improving accounting conservatism level. Finally, the introduction of the margin trading system has introduced a large number of new short sellers, thus increased the demand for negative information, and also increased the demand for high-quality analysts, thus improve the transparency of margin companies. Therefore, we expect that the target company of the margin trading will weight more on the accounting performance indexes in the design of executive compensation contract. Secondly, turning to the market performance, which is more difficult to be manipulated by the managers. Under the premise of an effective market, market performance not only measures the impact of all the past behaviors of the management, but also contains the forward-looking forecast of future performance, and also reflects the investor′s mood and psychological preference. Therefore, market performance is also an important comprehensive index to evaluate the manager′s performance. The introduction of margin trading mechanism can effectively improve the quality of market performance indexes. First of all, the short selling mechanism contained in margin trading has a strong price discovery function, which can correct the high stock price in time, make the price quickly return to the basic value, thus improve the information content of stock price. Secondly, margin trading makes short selling profitable, which will encourage short sellers to mine hidden negative information from more information sources and channels, this information intermediary effect of margin trading is helpful to improve the new information absorption speed of stock price and brings higher information efficiency. Finally, there is evidence showing that the margin trading could reduce the synchronization of stock price, makes the stock price contain more heterogeneous volatility and more individual stock information, thus improves the pricing effect of stock price. Therefore, the target company of margin trading should weight more on market performance in the design of executive compensation contract. By using the A-share listed companies in Shanghai and Shenzhen stock exchanges from 2004 to 2015 as our research samples, we adopt the difference-in-difference method to examine the relationship between margin trading and executive compensation performance sensitivity.The empirical results show that margin trading have significantly improved the executive pay-accounting performance sensitivity as well as the executive pay-market performance sensitivity, indicating that margin trading has improved the earnings quality and the market information efficiency, which facilitates the signing of more efficient executive compensation contract, thus demonstrate that margin trading has significant external governance effect. Further mechanism tests find that the utility of margin trading is more pronounced in the firms located in weaker external institutional regions, with lower internal balances, larger management power and in the private firms, demonstrating that the margin trading is more efficient in the weaker governance environments, it works as an substitute for other external governance mechanisms.

Key words: securities margin trading, executive compensation, pay-performance sensitivity, corporate governance, difference-in-difference (DID) model