Research SMCBs Incentives, Internal Controls And Performance

The financial industry is the core of modern society and economy,while commercial banksare the main components of the financial sector, its role in modern society is becomingincreasingly important. Commercial banks operating currency of special business, with thecreation of the credit function, which is destined to risk it bears much greater than the generalindustry. Because there is often a conflict between the small and medium commercial banks’internal control mechanisms and operating performance goals, this contradiction by the potentialrisks arising from operations cannot be ignored due to the dependence of modern economies oncommercial banks as the main financial system, commercial banks once crisis, a country andeven the world economy will suffer a huge disaster. Therefore, the commercial banks tostrengthen internal controls, internal control and full coordination between the operatingperformance goals to achieve, it is very important.Based on the theory of the black box to the perspective of incentives proposed to reflect thesmall commercial banks’ internal controls and business performance objectives to achievecoordinated results of two-dimensional theoretical hypotheses, the interaction mechanism andinternal control mechanisms and operating performance goals to achieve coordination oftheoretical analysis and the use of10small and medium commercial banks from2011to2012public data empirical test results showed that: the current coordination of small and mediumcommercial banks’ internal controls and business performance targets is relatively good, but thequality needs to be improved coordination. The fundamental reason is that philosophy deviationoccurs under the existing incentive mechanism, namely the excellent business development,internal control and risk management gave way. Way to solve this problem, including scientificcertainty coordination between internal control and business performance goals to achieve, fosterinternal control and compliance culture, improve internal control evaluation system, and improvethe incentive mechanism, enhance internal constraints.