An Empirical Analysis On Incentive Efficiency Of The Management Compensation And Incentive Mechanism Based On EVA From Chinese Listed Companies

In the modern enterprise mechanism, it is a important problem of thereformation in the compensation mechanism to establish a useful mechanism to activeand restrain the manager behavior.In order to play a role of evaluation and realize theincentive effect, compensation incentive mechanism has to be with performancevaluation indicator. The current performance valuation mechanism mainly consists ofconditional accounting indicators which apt to be manipulation, it can not appraisethe valuation of the shareholder and lead to management’s short-term behavior.Thesefaultiness obviously restrain the current enterprise performance valuation mechanism.In1982, Stern Steward&Co. came up with concerpt of Economic ValueAdded(EVA) which is the base of value management performance valuationmechanism. It achieve complete success.The thesis consists of six sections to discussquestion about compensation mechanism establishment and incentive efficiency basedon EVA. Section1discusses the deficiencies and defects about current compensationmechanisms such as Annual Compensation Mechanism and Annual BonusMechanism, then come up with the new compensation incentive mechanism based onEVA. Section2appraises the current accounting and non-accounting indicator valuingthe conditional compensation mechanism. Section3analyses and contrast twoperformance evaluation mechanisms Share Option Incentive Mechanism and EVABonus Bank Incentive Mechanism, then improve them. We declare the EVAcompensation incentive mechanism can avoid the defect about the currentcompensation mechanism such as managements only care about the short-time benefit.The new mechanism reflect operator’s performance and ensure shareholder’s right.Section4focus the structure of EVA indicator based on MM、CAMP and EVAformula and explain the process about structure of EVE. Section5is about empiricalanalysis, we compare and analyse the incentive efficiency to managementcompensation from EVA and accounting indicators by stepwise regression、principlecomponents analysis and multiple linear regression. The empirical results that puttingEVA and EVA into the accounting compensation mechanism give rise to the strongerincentive efficiency to management compensation. In the last section we discuss theproblem result from EVA compensation mechanism carried out in China, we raise therelative policies about this mechanism and hope to give a hand to these enterprise.