| In recent years, many researchers have learned about the efficiency of corporate investment in China. They believe that Non-efficiency investments can be divided into over-investment and under-investment. Firstly they set up an investment model; they make regression between the actual investment and the expected one. The regression residual will be sorted as over-investment and under-investment by the sign. Then they do regression between the PPS(Pay-Performance sensitivity) and over-investment or under-investment in order to study the relationship between them. However, through a lot of reading I found out that the general efficiency of the financing includes the connotation of the investment efficiency. And the financing activities are the prerequisite of the investment activities; the investment activities are the purpose and results of the financing activities. Therefore, I will study the efficiency of investment and financing, which we can regard it as the source of the enterprise value, as a whole. In this paper, I will explore solutions to the principal-agent problem through the study of the relationships between the Efficiency of investment and financing and the Executives'incentive compensation which was divided into short-term incentive and long-term incentive.The research indicates that the Efficiency of investment and financing has a negative correlation with the Executives'incentive monetary compensation (short-term incentive), while has a positive correlation with the Executives'stock ratio (long-term incentive). So, design and integrate short-term incentive and long-term incentive appropriately will be of great help to improve the efficiency of investment and financing. This paper's innovation lies in that the efficiency of investment and financing are studied as a whole, Furthermore, this paper research on the relationship between the Efficiency of investment and financing and the Executives'incentive compensation. |
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