Study On The Substitution Effects Of Supervision Mechanism And Incentive Mechanism In Chinese Listed Corporation

In the corporate governance literature, mostly researchers study on corporate governance mechanisms. In particular, majority of analysis focuses on one part of the corporate governance mechanism, especially only on the relationship between one or two governance variables and the traditional assessment criteria of accountancy performance. this paper studies the relationship between many factors regarding corporate governance mechanism and the corporate value using the data of 1250 listed companies from Shenzhen and Shanghai during the period form 2001 to 2007. To be specific, we do not only analyze the supervision mechanism (Leadership Structure,Board structure,Board shareholding), CEO incentive mechanism (CEO Salary Sensitivity,Manager ownership,Manager tenure) of corporate governance, and etc, but also pay great attention to the effect of combination of the two mechanisms on the economic added value.The empirical results found that only consider a single governance mechanisms impact on the performance, regression analysis results contrast with our assumptions. The reason is that we use EVA performance indicators taking into account the risk factors. Secondly, the regression results from the governance variables and the EVA, the company only pays attention to a governance mechanism, it is often unable to effectively enhance the corporate value.The results also show that supervision mechanisms and incentives mechanisms are substitute for one another. When the board is insider-controlled companies, shareholders can achieve maximum benefits by increasing CEO Salary Sensitivity,raising ratio of manager equity,extending Manager tenure, shareholders also can achieve maximum benefits by substitution of supervision mechanism and incentive mechanism in companies of separation of chairman and CEO or high proportion of directors stakes. Supervision mechanisms for the board of directors and the management incentive mechanism exist substitution effect, we can constructe different combinations of governance mechanisms to maximize net income.China's accounting system is further improving, the better reflect the market value of the company EVA performance indicators will be widely used in the company's financial. This will bring new research about corporate governance issues. Based on this, this paper studies corporate governance supervision mechanism, incentive mechanism and substitution impact on EVA. We believe that the combination with the corporate governance mechanism to resolve agent problem, it will be an inevitable choice for China's listed companies.