Experimental Study Of A Truth-inducing Pay Scheme Optimization

As one of important means for the internal management control, the budgetary management playsan important role in the internal management control. However, the budgetary slack has alwaysbe one of the unsolved problems in the enterprise budget management, the economicconsequence of which may lead to budget management plan and control with no effectivecoordination and the evaluation and inventive mechanism without objective criterion.The budgetary slack is also a protuberant problem in enterprise budget management in China. Inorder to improve the level of budgetary management and overcome budgetary slack, thetruth-induced pay scheme has been introduced a relevant improved by Weitzman for the first time,and the combined cardinal contract has been introduced by Huzuguang based on his research toimprove the truth-induced pay scheme. Although the theoretical study and experimental researchresults have show that the Truth-Inducing Pay Scheme is more effective in overcoming budgetslack than slack-Inducing pay scheme, practical cases showing that there still exist manyproblems in Truth-Inducing pay scheme, which will not make against the sustainableimprovement of the enterprise performance targets. The problems result from the coefficientsneeded by the Weitzman of truth-induced pay scheme and the weight coefficients required by thecombined defining base quota method may cause the game of superior-subordinate budget andincrease the agent costs. What is more, the former truth-induced pay scheme has not solved thesuperior-subordinate budget problem on the stop working point. In order to improve the currenttruth-induced pay scheme, this paper has made some thinking and study.This paper has studied on the influence of budge program rewards and punishment coefficient onthe budget index to seek a reasonable scheme coefficient determination method. And also therewards and punishment coefficient of Weitzman model has been improved dynamically, theoptimization truth-induced pay scheme proposed in this paper has solved the problem that thelower budget may stop working hard to increase output when they complete or cannot completethe budget task, and reduced the game of the superior-subordinate budget.