An Empirical Study:Incentives Of Executive Compensation Of Listed Companies And Effectiveness Of Internal Control

Internal control construction in China started relatively late, but the discussion ofinternal control, has never stopped. In recent years, China has successivelypromulgated rules and regulations related to internal control, its purpose is to protectthe development of enterprises. However, the implementation of China’s internalcontrol was not perfect. Sanlu milk powder, the the Guangxia events are exposed atthis stage in China’s internal control problems.Internal control is ultimately executed by people,but executives play a certainrole in the execution of internal control,the most effective way to carry out internalcontrol is to incentive them. The purpose of the incentive is to execute internal controlsystem better and play the importance of internal control. View from the operatingconditions of the private listed companies in China, China’s private listed company’sexecutive compensation structure is not reasonable, the form of monetarycompensation and equity incentive ratio is a serious imbalance, resulting in paymechanism for private listed company executives is difficult effective long-termincentives, have a certain impact on the internal control, to some extent, increase thecompany’s agency costs, reduce the performance of the company’s internal controleffectiveness of out of the question.Review of the literature can be found, the domestic study of internal control ismainly concentrated in the design of internal control system, operation,relatedinformation disclosure and so on. And less in the relationship between the corporateexecutive compensation and the effectiveness of internal control.To research the relationship between the corporate executive compensation andthe effectiveness of internal control, this paper firstly defined the effectiveness ofinternal control definitions and measurement methods used in the study.Measuring theeffectiveness of internal control mainly based on degree of Internal controlobjectives,including strategic goals,objectives targets,report targets and thecompliance target. Secondly, the analysis of the relevant theory, put forward theassumption of this article: executive pay can be explained by the effectiveness ofinternal control was positively related to executive compensation and theeffectiveness of internal control can not be explained. Again, in2009-the year2010 China’s voluntary disclosure of internal control510Private Listed Companies for thesamples analyzed from an empirical point of view of executive pay of private listedcompanies in the effectiveness of internal control obtained interpretable executivescompensation and the effectiveness of internal control is positively related toexecutive pay can not be explained with the effectiveness of internal control hasnothing to do. The cause of choosing private enterprise is that state-owned enterprisesare controlled by government, salary in these enterprises exist solid. Finally, therelevant recommendations.