Abstract: Under the debate of privatization of state-owned enterprises, rational transferee is bound to require executives′ remuneration contracts to be more effective, which helps to improve corporate performance.The paper takes data of listed companies in China in 2003-2014 years as samples, and investigates the influence of privatization of state-owned enterprises on executive compensation incentive effectiveness by difference-in-difference method. The study finds that the privatization of state owned enterprises has significantly improved the pay of executives, while reduced the sensitivity of executives pay performance. Further study finds that, according to the degree of privatization of state-owned equity group, in this ways that do not exist state ownership after management change and privatization, the sensitivity of executive pay performance decreased significantly; according to corporate governance, the equity balance and the institutional investors help to ease the sensitivity of executive pay and corporate performance after the privatization of state owned enterprises. The research shows that improving the effectiveness of executive compensation incentive is not a simple change of privatization. Different corporate governance, enterprise size, and the degree of privatization have an impact on it.Therefore, the reform of the privatization of state-owned enterprises needs to grasp the rhythm and degree, and pay attention to the moderate retention and play the governance role of the state-owned equity component. In addition, the expansion and reflection of the conclusions of the study will provide enlightenment for the management and reform of the current executive compensation system in state-owned enterprises.

Key words: privatization of state-owned enterprises, the sensitivity of executive pay performance, degree of privatization, corporate governance