A Study On The Impact Of Executive Equity Incentives On The Existence Of Internal Control Defects In Listed Companies

Recently, the failure of internal control is not uncommon, which also led to the discussion of the effective implementation of internal control among scholars. Although the rules and regulations of internal control are constantly improving, but in the current situation, the effect of internal control is unsatisfactory, such as the events of Huaneng Group, China Aviation Oil(S) and Yinguangxia. These events have fully exposed the problems of internal control in today’s China. The promulgation of institutions and regulations can admittedly constraints internal control. However, for enterprises, the promulgation of institutions and regulations is a kind of external pressure, urged them to improve internal control passively, so the result can be imagined. So how to effectively strengthen the internal control and reduce the internal control deficiencies ? Theorists are also constantly exploring. From the current situation, most of the scholars studied the influence on the internal control deficiencies from the perspective of firm characteristics, characteristics of external audit and corporate governance, but few scholars have paid attention to the equity incentive. Actually, the internal control is carried out by “people”, the executives of listing Corporation are very important to the implementation of internal control. The enthusiasm of executives directly determines the effectiveness of internal control. And the most direct and effective way to improve the enthusiasm of the executives is to carry out equity incentive. Therefore, this paper focus on the equity incentive of the executives of listing Corporation, test the relationship between equity incentive and the existence of internal control deficiencies empirically. The conclusion is that the equity incentive of listing Corporation can effectively reduce the internal control deficiencies, and the higher the equity incentive level is, the lower the severity of internal control deficiencies is.