Empirical Study On The Relationship Of Debt Financing And Managers' Non-pecuniary Compensation From The Perspective Of Agency Costs

Debt financing is one of the main financing channel for the listed companies, however, the interests of creditors has not been paid enough attention and protected appropriately for a long time. What's more, the function on corporate governance of debt financing has not been fully developed and exploited. In theory, debt financing has a series of important effects on corporate governance, for example, incenting and constraining operators, inhibiting in-efficient investments, optimizing enterprise's configuration of control rights. These functions could alleviate the interest conflict between shareholders and managers and could also cut down the equity agency costs. In a word, these functions have very important significance in reducing agency costs. Non-pecuniary compensation is a typical example of equity agency costs, and is a pretty common phenomenon in the world. Although there are theories prove that it is inevitable in the background of separation of two-ownerships and is positive in some meaning, but in our particular institutional and market conditions, managers'non-pecuniary compensation has become particularly prominent, and brings about negative influences on the value and performance of the company.In the framework of debt governance, this paper does an empirical study on the relationship of debt financing and managers'non-pecuniary compensation in the perspective of agency costs. Because of its uncertainty and privacy, so how to measure managers'non-pecuniary compensation scientifically and accurately is a difficult point of this paper. After reading relevant literatures,I compare the advantages and disadvantages of several quantitative methods. Ultimately I determine to collect the detailed items from the"other related cash paid for business activities"disclosed in company's annual statements to measure managers'non-pecuniary compensation. It is divided into eight categories, such as office expenses, travel expenses, entertainment expenses, communication expenses, overseas training fees, board fees, car fare and conference fees. Deducting the items in great dispute, such as office expenses, board expenses and conference expenses, this paper uses the total sum of the rest five items as the measurement of managers'non-pecuniary compensation.On this basis, the paper summarizes and analyzes relevant theories, then presents five hypotheses. After strict and serious collection, this paper selects 108 eligible companies from the A-share listed companies in Shanghai exchange, and then uses the published data of 2008 and 2009 to examine the relationship of the overall debt level, bank loans and commercial credit, short-term and long-term liabilities and managers'non-pecuniary compensation.The results show that the asset debt rate and managers'non-pecuniary compensation have a weakly negative correlation; the rate of bank loans and commercial credit are negatively correlated with the level of managers'non-pecuniary compensation, and commercial credit's effect is more obvious; the rate of short-term debt is significantly negatively correlated to the managers'non-pecuniary compensation; the relationship between the rate of long-term debt and the level of managers'non-pecuniary compensation shows a weakly positive correlation. After analyzing and discussing the results, this paper puts forward some advices, such as improving the mechanism of corporate governance, optimizing the process of bankruptcy and so on.