An Empirical Study On Manager’s Compensation Incentive System Based On EVA

With the separation of corporate ownership and management， the modern enterpriseestablishes Principal and Agent Relationship. The agency costs exist in the moderncorporate，which is caused by the disaccord between the owner and the manager，byinformation asymmetry and unfair responsibility. How to reduce agency costs， andhow to make the principal’s interests consistency with the managers interests， It’sneed the corporate to design a scientific and reasonable remuneration incentives， andalso it’s a difficulty for the corporate.A scientific and reasonable motivation mechanism must base on useful measurecriterion of achievement valuation. Based on the accounting index to assess theperformance，the traditional motivation mechanism ignores the cost of equity capital.As a result， accounting profit does not mean that will add the value of the assets ofthe shareholders. In addition， Managers by adjusting the accounting policies tomanipulate accounting data， Therefore， the traditional motivation mechanism isunlikely to play an effective incentive role.After the analysis of the present motivation condition in China， this article points outEVA is an effective index to assess the performance in the view of creating the valuefor the shareholder. On the one hand， EVA deducts the cost of all capital includingdebt capital and equity capital. On the other hand， according to the actual situation，the enterprise by adjusting the accounting project to calculate EVA. This article designa short-term motivation mechanism based on EVA and a long-term motivationmechanism based on EVA. Further， the empirical research on Chapter V combinesTraditional accounting indicators with EVA. Finally， in Chapter Ⅵ， make asummary and make the inadequacies of this article， make recommendations for this.