Internal Control,EVA Assessment And Executive Corruption

As far as the current situation is concerned,China’s anti-corruption has achieved an overwhelming victory,but the fight against corruption is still grim and complex.According to the basic spirit of the report of the 19th National Congress of the Communist Party of China,the focus of anti-corruption in the new period is to establish the system logic of corruption governance.Relying on the institutionalized means to form a long-term anti-corruption mechanism,we should not only treat the symptoms,but also treat the root causes.We should not only make people "dare not to corrupt" and "can not corrupt",but also "do not want to corrupt".Therefore,the comprehensive governance model came into being.However,due to the misunderstanding of people’s mind,the comprehensive governance model has not been scientifically and reasonably used in practice,and the problems of blind construction and inefficient operation become more and more prominent.In recent years,the use of comprehensive governance model has almost reached the point of "abuse".As long as multiple governance measures are used together,they are often titled as "comprehensive governance model",which pursue the absolute increase of institutional supply unilaterally,but pay little attention to the scientificity and rationality of institutional structure itself,leading to the sharp increase of the total cost of system design,as well as the increase of the operation cost and efficiency loss as a result of the conflict and confrontation among different systems.Therefore,the comprehensive governance model has no obvious governance advantage over the single governance model.In this context,it is necessary to clarify the theoretical understanding and practical path of comprehensive governance model.According to the relevant theories of system theory and new institutional economics,the comprehensive governance model is not an arbitrary combination of various governance measures,but an institutional system that accords with both "rationality" and"efficiency" characteristics,in which the system elements can complement and support each other in function and has no friction caused by the competition and conflict between them,so the operation efficiency of the system is always in the optimal state.Objectively speaking,it is difficult to find such a perfect research situation in reality.However,through the screening and restructuring of institutional elements,we can simulate a simplified model as close to the ideal system as possible.This paper holds that the internal control system in the micro enterprise level is a typical constraint-based system,and the EVA assessment system is an incentive-based system.The two systems can accord to the governance characteristics of "rationality" and "efficiency" to the maximum extent.Therefore,this paper put them into identical framework and analyze whether the combination of the two systems play comprehensive governance role in the process of corruption governance and how its internal mechanism works.Specifically,based on the theory of new institutional economics,principal-agent theory,supervision theory,balance theory,incentive theory,management control theory,internal control theory and other related theories,by using the public data of non-financial listed companies in Shanghai and Shenzhen stock markets from 2007 to 2018,adopting the method of normative research and empirical research,the paper focuses on the topic of the governance effect and mechanism of internal control system and EVA assessment system for executive corruption,as well as whether the combination of the two system can play a comprehensive governance effect in the process of corruption governance.On the whole,both internal control and EVA assessment system can effectively suppress the implicit corruption and explicit corruption of executive.The system composed of the two can complement each other in the process of corruption governance without overlapping of system construction and function,so it has the effect of comprehensive governance.The specific conclusions and findings are as follows:Firstly,internal control can suppress executive corruption.Not only the total effect of internal control suppressing implicit corruption and explicit corruption of executive is significant,but also the mediating effect of endogenous power as the transmission path and the moderating effect through influencing the relationship between exogenous power and corruption are also significant,which prove the nature of internal control of a power allocation tool and the logic of corruption governance based on the control of power.By distinguishing the five elements of internal control,we find that the governance of implicit corruption mainly depends on the effective implementation of control activities,as well as control environment and supervision,while the governance of explicit corruption mainly depends on the improvement and optimization of the overall control environment of the organization.By dividing into the two dimensions of property protection and the law enforcement environment,it is found that the government effect of the internal control on two types of executive corruption is more apparent in the regions with strong property right protection and strong law enforcement.Therefore,the point of view can be concluded that the corruption governance function of internal control is born in company management decisions,in which the institutional environment factors must be weighted.Secondly,EVA assessment system can suppress executive corruption.Degree of both the implicit corruption and explicit corruption of executive have been reduced after enforcement of EVA assessment in Central Enterprises,while their mechanism is different.EVA assessment suppresses implicit corruption by alleviating improper incentives as the transmission path,while surpresses explicit corruption with the help of the deterrent effect of administrative and judicial intervention to a large extent.The results prove the incentive-based corruption goverment logic of EVA assessment,with certain limitation in itself.It is found that the implementation of EVA assessment can reduce the implicit corruption induced by excessive incentive,but cannot curb corruption by correcting the insufficient incentive,indicating that the current assessment method does not emphasize enough on long-term incentive.Distinguish between property protection and law enforcement environment,it is found that the role of EVA assessment in inhibiting executive corruption mainly occurs in regions with strong property right protection and law enforcement,indicating that the maximization of incentive efficiency of performance assessment system needs the coordination of institutional environment.Thirdly,the internal control and EVA assessment system have a comprehensive goverment effect on executive corruption.Internal control can significantly promote the effect that EVA assessment restrain implicit and explicit executive corruption,while EVA assessment can significantly improve the effect that internal control restrain implicit corruption other than explicit corruption.The internal control and EVA assessment system complementary each other in a way of incomplete symmetry,thus constitute a system accord with the "rational" characteristic.Besides,there is no partial substitution relationship between internal control and EVA assessment system.Besides,there is no obvious overlapping of construction and function in the system composed of internal control and EVA assessment,so the system has the characteristics of "efficiency".Distinguishing between property protection and law enforcement environmen,the comprehensive governance effect is sustainable in areas with strong property right protection and strong law enforcement,while in areas with weak property right protection and weak law enforcement,the comprehensive governance effect is not sustainable.In this paper,the possible innovation points are as following:Firstly,different from the previous studies which regard management power as exogenous variables and use the moderating effect model to test whether internal control can regulate the corruption caused by management power,this paper divides the management power into endogenous power and exogenous power after considering the difference between the initial power due to the exogenous governance framework and the dynamic power caused by the corporate governance reform,and uses the mediating effect model and the moderating effect model respectively to examine the mechanism of internal control in the governance of executive corruption in two situations.Secondly,it supplements the research on the governance of executive corruption from the perspective of incentive.Most of the existing studies attribute the executive corruption to the unconstrained power,and advocate to curb corruption by optimizing the allocation of control rights,strengthening internal and external supervision and regulating the operation of power,such as improving the organizational structure and system,and establishing an effective internal control mechanism.This paper studies the problem of corruption governance from the perspective of incentives,and finds out that improper incentives can also lead to executive corruption and it is of practical significance to establish an appropriate assessment and incentive mechanism for the prevention and control of corruption.Thirdly,it clarifies the characteristics of comprehensive governance model theoretically and empirically.Different from the existing studies which focus on the governance of a single system,this paper puts the internal control and EVA assessment system into the same analytical framework to study the governance of executive corruption based on the integrated thinking,and empirically tests the comprehensive governance effect from two dimensions of "rationality" and "efficiency",and further discusses the sustainable effect of the comprehensive governance effect.