Corporate Financial Target Selection And Governance Mechanisms Arrangements

Now in the research of firm financial goal, we pay little attention to whether there exists a set of effective governance mechanism to ensure the financial goal achieved when each enterprise participator takes activities to pursue their self-utility maximum and personal rationality and collective rationality can be merged. Most research about firm governance aims with the firm value maximum and studies how to arrange governance mechanism to achieve it. We consider the firm value maximum as the firm goal is suitable, but as the financial goal leads to sharp debate. The main problem lies in which financial activities is a part of enterprise activities and emphasizes to manage every segment of capital flow, so the financial goal as to direct the firm financial activities should be measured accurately. But now there are much difficulties in measuring the firm value, so firm value maximum as the financial goal can not be easily controlled in practice.Therefore, in the paper we choose the residual income maximum of the firm instead of the firm value maximum, and can prove that the residual income of the firm is subordinate to the firm value maximum. Based on that, we bring some results of governance theory into the study of finance fields as well as analyze how to arrange the governance mechanism of the firm and ensure to achieve the financial goal of the firm.The paper 2nd chapter starts with the relation between the option of the firm financial goal and governance mechanism arrangement, explains that the optimum governance mechanism arrangement can achieve firm value maximum and also guarantee the residual income maximum of the firm achieved. The residual income of the firm can carry on quantization, and reflect the stake among each participator and financial risks of the firm, so the residual income of the firm can be the financial goal under the circumstances that the residual income maximum of the firm is subordinate to the firm value maximum, which is the goal of the firm.From the view of incentive and constraint, the paper divides the firm governance mechanism into three parts: the supervision of the enterprise, the incentive mechanism in the capital structure, and the salary incentive mechanism. In 3rd chapter, from theview of constraint we discuss how to arrange the supervision mechanism of the firm in order to ensure that the financial goal about the residual income maximum of the firm will be achieved. In 4th chapter, we think that: in essence the option of the firm capital structure is a process in which each participator uses the incentive mechanism to restrain moral risks and adverse selection behavior of other participators when there is asymmetrical information and ensures they can share the investment repayment of the firm at high extend, in order to purse self-utility maximum. And the optimum arrangement is to make the agency cost fall to minimum for the asymmetrical information. The reduction of agency cost to minimum is to maximize the residual income of the firm. In 5th chapter we analyze emphatically how to arrange salary incentive mechanism and how to make the best incentive effect to achieve the financial goal if we choose the residual income maximum of the firm as the financial goal.