Research On Executive Incentive Contract Of Commercial Banks Unedr Multi-task Target

The modern economy is constituted by numerous contrats.Since the basic analytic framework of incentive theory established,the theory has aroused the attention of mainstream economics.It has been applied in various branches of economics and management as an important tool of analyzing corporate governance,organization behavior,corporate finance and other fields.As the dominant parts of the financial system,commercial banks have made great development in both the scale of assets and the level of management.The mechanism of corporate governance in commercial banks has been improved obviously.But the incentive and restraint mechanism to executives is not perfect,and the moral-risk problem still remains.Building up a set of executive incentive measures combining with practice which suits for sustainable development of commercial banks has important value for the future of commercial banks theoretically and practically.Before comprehensively analyzing the essential characteristics of the incentive contract for commercial bank executives,summarize the particularity of the commercial bank including the multiple objectives of management,the complexity of governance mechanism and structure,the control of insiders and so on.The multiple principal-agent relationships between the stakeholders and the executive of commercial banks are further proposed and depicted.The complex principal-agent relationships between the commercial bank,shareholders,creditors,regulators,employees and the public are not independent but interactive.This also led to the executives in the commercial bank not only optimize the asset allocation of commercial banks and maximize profits but also control financial risks effectively and maintain the overall financial safety of banks.More importantly,the executives must guarantee the interests of the state and the public,and strive for the maximization of social welfare.At the same time,executives also need to accomplish some other tasks,such as their own promotion,the improvement of their reputation and so on.Combining with the characteristic the multi-task and the practicability of incentive contract for commercial bank executives,we choose formal contracts and relational contractsas the existence form of incentive contracts for commercial banks executives.In the framework of a formal contract,expanding the Holmstrom-Milgrom multi-task principal-agent model establish commercial bank executive incentive multi-task principal-agent models including periods model and long-term model.Then obtain the optimal solution.In the framework of a relational contract,based on the contradiction and balance between short-term income and long-term income,establish repeated game models,and figure that the discount rate determines whether the relational contract could perform smoothly.But the agent also has effects on the contract.Breaking through the limitations of traditional principal-agent relationship and commercial bank executives’ single task goal,combine the commercial bank executives’ formal contract with relational contract for forming an interactive contract base on the integrity of their multitasking behaviors.Continuous development of commercial banks corporate governance could produce an expectation of the complicated management goals.According to this expectation extend the above incentive contracts to general multi-task models.Then the single formal contract,the relational contract and the interactive contract are all together to constitute a set of contracts fitting for different conditions of commercial bank executives’ incentive.Select a sample of Chinese listed commercial banks to do empirical test for the effectiveness and rationality of the proposed incentive contracts.The results show that business performance,risk control and social responsibility have significant influences on executives’ compensation.Even under the influence of policies,the results also conform to the expectations set by the incentive contract model.The results also reveal that only a positive and negative combining constraint mechanism which is related to the tasks completed by commercial banks executives could generate optimal incentive contracts for commercial banks.This point not only confirms that the incentive system of commercial bank executives in China has been gradually improved,but also provides empirical support for policy formulation and development practice for commercial banks in China from the perspective of complete contracts.The research on executive incentive contract of commercial banks is a complex research system.Although some achievements have been made,there isstill a lot of space in the future.In the fields of theoretical research,the transformation from executive inventive complete contract to incomplete contract will become an importment part of the research.In the fields of empirical research,the subjective evaluations of the commercial bank executives’ tasks which can not be confirmed by the third party and non-monetized remuneration also need to be further explored.