An Empirical Analysis On The Influence Of Executives Incentive And Debt Financing On Corporate Investment

Agency theory produced two types of conflicts in the modern enterprise, i.e.the shareholder-management conflict and shareholder-creditors, effective management incentives can relieve shareholders-management conflicts to reduce over-investment in enterprise. Studies of many scholars had proved that there was a positive correlation between management incentives and enterprise investment. However, more and more scholars recognized that debt financing can also ease over-investment problem caused by shareholders-management conflict. Since the management incentives and debt financing can affect corporate investment, it’s of great importance to study these issues how they influence the corporate investment and the relationship exists when they influence corporate investment.First of all, referring to the existing literature about executives incentive, debt financing and corporate investment, put forward the research meaning and research method of this paper. Secondly, this paper has a detailed analysis of the principal-agent theory, incentive theory, finance theory and the enterprise investment theory. These theories laid a theoretical basis to theoretical analysis and empirical analysis about executives incentive, debt financing and corporate investment. Then, the article defined the relevant concepts, according to the theoretical basis, we had theoretical analysis about executives incentive, debt financing and corporate investment. Then, according to the above theoretical analysis, we put forward the research hypothesis in this paper. we had empirical analysis about executives incentive, debt financing and corporate investment. The article selects financial data of 2006-2012 China’s listed companies and financial data of listed companies that implement equity incentive in 2006-2012 separately, and establish two linear regression model of management equity incentive and management compensation incentive, to study the effect of management incentives and debt financing for business investment using descriptive statistics, Pearson correlation coefficient test and regression analysis. The empirical results show that:management incentives have a positive effect for business investment; Debt financing has a negative effect for business investment; There is a correlation between management incentives and debt financing in influencing business investment. Finally, according to the specific situation of China’s listed companies, the article put forward policy recommendations combining research findings.