Research On The Relationship Among Executive Incentive,dynamic Adjustment Of Capital Structure And Enterprise Value Creation

As an important arrangement of corporate governance,executive incentive is not only a compensation for the executive management behavior by shareholders,but also an effective means to motivate,restrict its shortsightedness and act based on personal utility under the background of conflict with the interests of senior executives.In recent years,policy advocates from "made in China" to "Chinese intellectual manufacturing".The industrial development in China has gradually changed from labor intensive to capital and talent intensive.The improvement of enterprise performance needs the empowerment of high-level talents.Therefore,it is undoubtedly an important means to attract talents,increase the stickiness of senior executives,stimulate the enthusiasm of senior management,alleviate the conflicts of agents and improve the performance of enterprises.However,the continuous emergence of negative news such as "sky price compensation","performance decrease and salary increase" has made the public question about the listed companies,especially the operation efficiency of state-owned listed companies,the management ability of senior executives and even the fairness of income distribution,which leads to public dissatisfaction.For the senior executives of state-owned enterprises,the government issued and implemented the policy of "salary limit order" in 2015.On the one hand,the policy issued caters to the public's consideration of social fairness and efficiency and the rationality of income distribution,but on the other hand,it limits the upper limit of executive compensation by administrative intervention and encourages the behavior of restraining executives by non market-oriented compensation mechanism,The effect of its policy implementation also raises questions.Under the strategic goal of adjusting economic structure and promoting supply side reform,the decisive role of market in resource allocation is needed to realize the high-quality development of enterprises.Therefore,it is necessary to carry out in-depth research on the reform of the executive incentive system which is unified with the combination of incentive and restriction and matching rights and benefits.Due to the objective existence of asymmetric information and incomplete contract,the agency conflict between shareholders and executives has always troubled modern enterprises.Looking at the current situation of corporate governance in China,when the executives who control the company control cannot be satisfied because of their expected earnings or the income is inconsistent with their actual performance,the agency conflict between them will be further intensified,and the defense motivation or opportunism of the executives considering "stable position" or other vested interests will be triggered,Thus,it leads to the cognition and behavior preference which is contrary to the interests of shareholders,makes the investment and financing decision-making behavior which deviates from the shareholders' expectation,and reduces the enterprise value.According to the optimal contract theory,under the market-oriented incentive mechanism,the signing of incentive contract should fully consider and meet the interests demands between each other,avoid the conflicts of interests caused by the unreasonable distribution of residual control rights and surplus income caused by incomplete contracts,and then coordinate the relationship between executives and shareholders,It is necessary for executives to work hard and implement investment and financing decisions with the guidance of maximizing the value of enterprises.As the centralized embodiment of the rights and obligations of stakeholders,capital structure is the cumulative result of long-term financing behavior of enterprises,and an important content of corporate financing decision.The executive is entitled to the relevant decision-making power because the shareholders grant the control of the company,so the rationality of the capital structure is largely restricted by the senior executives' cognition and financing preference.According to the dynamic balance theory of capital structure,there is a target capital structure in the enterprise.At this time,the weighted average capital cost is the lowest and the enterprise value is the largest.While the actual capital structure is adjusted to the target capital structure,the performance of the enterprise is constantly improving.The existing research shows that,in addition to adjusting costs,the internal institutional arrangement of enterprises is also an important factor to influence the dynamic adjustment of capital structure.Therefore,the cognition and willingness of senior executives have important influence on the capital structure adjustment of the company.In conclusion,through the rational design of incentive contract,it can coordinate the conflicts of interests between executives and shareholders to a certain extent,which will positively affect the senior executives' cognition and adjustment willingness,and promote the executives to implement capital structure decision from the perspective of maximizing the value of the enterprise,improve the speed of dynamic adjustment of capital structure and reduce the deviation from the target capital structure,At the same time,the performance of enterprises is improved while adjusting the capital structure.Through the intermediary effect test,this paper finds that the dynamic adjustment of capital structure plays an intermediary role in the path of influencing the dynamic adjustment of capital structure and the performance of enterprises.Through the analysis of the existing literature,it is found that: firstly,most of the existing researches are based on the explicit incentive(namely,salary incentive and equity incentive)perspective to investigate the impact of executive incentive on the dynamic adjustment speed of capital structure,and the research on the hidden incentive(i.e.on-the-job consumption and salary gap)is relatively lacking,and at the same time,the research on the hidden incentive of senior executives(namely,on-the-job consumption and salary gap)is,Few studies have examined the impact of executive incentive on the speed and deviation of capital structure dynamic adjustment,and does not integrate the incentive methods into the overall analysis framework for comparative research,which makes it difficult to describe the impact of executive incentive on the dynamic adjustment and deviation degree of capital structure;Secondly,the existing research has not combined the three,which is difficult to fully reveal the role of executive incentive on the performance improvement of enterprises based on the perspective of dynamic adjustment of capital structure.As a means of incentive and restriction,executive incentive acts on executives and influences their cognition and behavior decision.The ultimate purpose of the incentive is to reflect on the performance of the enterprise.The economic effect of executive incentive is of great significance to optimize the signing of incentive contracts between shareholders and executives and improve the performance of enterprises.Finally,the existing research failed to take advantage of the opportunity of the "salary limit order" policy in 2015,which is the opportunity of the Graduate Student Research scenario,and based on the dynamic adjustment of capital structure,the paper discusses the relevant policy effects of state-owned enterprises after the implementation of the policy.Based on the basc research pradigm of prncipal-agent thory and informetion asymmetry theory,this paper studies the relationship between executive incentive,capital structure dynamic adjustment and enterprise performance by using the theory of management defense,incomplete contract,control and incentive,etc.The paper constructs the executive incentive system which includes the explicit and implicit two dimensions,namely,executive compensation incentive,equity incentive,on-the-job consumption and salary gap.The paper introduces the intermediary effect test,and at the macro level,This paper discusses the role path of executive incentive through the dynamic adjustment of capital structure,and the intermediary transmission function of dynamic adjustment of capital structure.At the same time,the policy effect of the policy is tested by using the opportunity of "salary limit order" policy.The empirical results are as follows:First,in a certain range,with the improvement of the incentive level of senior executives,the conflict between principal-agent is relieved,which positively affects the senior executives' cognition and financing decision preference.The incentive executives will make the capital structure adjustment decision which is conducive to the maximization of enterprise value.Through the empirical test of the dynamic adjustment of the capital structure and the executive incentive,it is found that in a certain range,the compensation incentive,on-the-job consumption and salary gap of the senior executives are all positively influencing the speed of dynamic adjustment of capital structure and reducing the deviation from the target capital.The influence of executive equity incentive on the dynamic adjustment speed of capital structure has not been confirmed,but the deviation from the target capital structure is reduced,which may be due to the long-term effect of equity incentive,which makes it delay allocation with the adjustment time of capital structure;Secondly,through the empirical test of executive incentive and enterprise performance,it is found that: in a certain range,the compensation incentive,on-the-job consumption and salary gap of senior executives are all positive to promote the performance of enterprises.The higher the incentive of senior executives' equity,the more unfavorable the performance of the enterprise,the possible reason is that the current equity incentive system is not complete,In order to achieve the conditions of exercise,executives choose the behavior of maximizing their personal interests,which reduces the performance of the enterprise;Thirdly,through the research on the intermediary effect of dynamic adjustment of capital structure between executive incentive and enterprise performance,it is found that,in a certain range,dynamic adjustment of capital structure plays an intermediary role in the influence of executive compensation incentive,on-the-job consumption and salary gap on enterprise performance.It is found that when the enterprise is over indebted,the higher the incentive level of senior executives is,In order to improve the performance of enterprises,the stronger the willingness of executives to adjust the actual capital structure to the target capital structure.The dynamic adjustment of capital structure has no intermediary effect between executive equity incentive and enterprise performance.Fourth,according to the state-owned enterprises,the paper uses the opportunity of the "salary restriction order" policy as an opportunity for the graduate students to study,and explores the path test of the influence of institutional changes of salary incentive mechanism on the performance of enterprises from the perspective of capital structure.It is found that,in a certain range,the implementation of the policy reduces the performance of enterprises and brings some value reduction effect,At the same time,the deviation from the target capital structure is expanded,which indicates that the effect of value reduction may be caused by the negative adjustment of capital structure.The main contributions of this paper are as follows: firstly,the scope of research is expanded,and the impact of four incentive methods on the dynamic adjustment of capital structure and enterprise performance is investigated clearly from the two dimensions of explicit and implicit incentive,so as to provide useful reference for enterprises to choose different incentive methods,understand the effect of each incentive method,and further improve the formulation of incentive contract.Secondly,this paper introduces the mediating effect test to explore the mechanism of executive incentive influencing corporate performance through capital structure adjustment,and supplements the mediating transmission path test for dynamic capital structure adjustment,which provides enterprises with the ability to understand the influence of different incentive methods on executives' cognition and behavior preference from the perspective of capital structure;Thirdly,based on the test of the effect of the "salary limit order" policy,it reveals to a certain extent the changes of executives' cognition and behavior preference(capital structure adjustment)after the administrative intervention,and then affects the economic effect of enterprises.It provides empirical evidence for dealing with the relationship between market-oriented incentive and administrative intervention,further improving the government's income distribution system,and deepening the reform of salary system.