The Research On Financial Incentive And Restraint Mechanism Of Executives In Listed Companies

As senior human capital, executives play important role in business activities. It is proved that ability, quality, attitude and value directly influence survival and development of company, and further determine the economic. The principal-agent relationship naturally results in the problem of incentive and restraint. As a part of financial governance, incentive and restraint mechanism can mobilize enthusiasm and initiative of executive by award and publish and so on. So it is essential to build a perfect set of financial incentive and restraint mechanism to reduce financial collision among parts, lower principal-agent cost, mobilize executives' initiative.This paper focusing on incentive and restraint from the financial point, regarding executives of listed companies as a target, using standardized methods of linking theory with reality, builds a perfect financial incentive and restraint mechanism. Firstly, this paper introduces research background and significance of financial incentive and restraint mechanism of executives in listed companies, and research ideas, methods, structure, content and concepts of executives, incentive and restraint mechanism. Secondly, it introduces human capital theory, principal agent theory, diminishing marginal utility theory, abroad and internal dynamic studies of incentive and restraint mechanism, building the theoretical framework of financial incentive and restraint from the pay mechanism, performance evaluation, information disclosure system and auditing committee system. Then, stating the current situation and analyzing the reasons for this situation, so clearly exposing the flaws in this area, the paper provides specific measures: raising the overall pay level, EVA-based bonus plan and stock option plan; reconstructing of a set of performance evaluation mechanism--establishing a performance appraisal system; actively promoting the reform of information disclosure system--to expand the disclosure of information, improve the quality of information disclosure, strengthen the supervision of information disclosure, and XBRL; further improving audit committee system. Finally, analyzing the shortcoming and looking to the future.The main content is the improvement of financial incentive and restraint mechanism of executives in listed company. The measures of improvement includes establishing a performance appraisal system-"cash flow + EVA+ network performance method", strengthening the role of XBRL playing in information disclosure , setting restraint means from internal finance. However, the theoretical framework only contains pay mechanism, performance evaluation, information disclosure system and auditing committee system, so inevitably there will be biased. In addition, the paper doesn't prove the effectiveness in empirical perspective.