An Empirical Study On The Relationship Between Executive Compensation And Firm Performance In High-Tech Manufacturing Companies

Abstract

This study takes firm performance as the dependent variable, selects Tobin ’s Q as the core performance indicator, and uses ROA and ROE as alternative indicators for robustness testing. Executive compensation and theproportion of management shareholdings are used to measure the levels of compensation incentives and equityincentives, respectively, while controlling for variables such as firm size, debt-to-asset ratio, growth potential, and thelargest shareholder’s stake. The results indicate that executive compensation incentives have a significant positiveimpact on firm performance; after incorporating the proportion of management shareholdings, both salary incentives and equity incentives significantly promote improvements in corporate performance, with equity incentives having a stronger effect; the core conclusions remain valid after applying a one-period lag, substituting performance indicators, and using 2SLS to address endogeneity issues. This paper concludes that improving executive compensation mechanisms and optimizing long-term equity incentives can help enhance the performance and long-term value creation capabilities of listed companies in the high-tech manufacturing sector.