Study On The Moderating Effect Of Top Management Team Characteristics On The Relationship Between Equity Incentive And Internal Control Quality

In recent years, China has made remarkable achievements in building equity incentive and internal control system. As for regime, the government issued a series of regulations.In practical level,more and more companies started to implement equity incentive, binding the interests and risk of owner and managers,to ensure the effectiveness of internal control. The demographic characteristics are the main factors that affect management acquisition, analysis and processing capacity. Therefore, we believe it is necessary to study the moderating effect of top management team characteristics on the relationship between equity incentive and internal control quality.We construct a model to study the moderating effect of top management team characteristics on the relationship between equity incentive and internal control quality based on Principal-agent Theory,Signal Transfer Theory and Upper Echelons Theory. This paper selects listed companies in Shanghai Stock Exchange and Shenzhen Stock Exchange between 2010 and 2013 as the research sample. The results show that there is a significant positive correlation between equity incentive and internal control quality. Also, education levels of the executive team plays a significant positive moderating role in the relationship between equity incentive and internal control quality, while the number of executive team plays a significant negative moderating role. It shows the executive incentive level, values and risk awareness have an important impact on internal control quality.Therefore, in the process of internal control implementation,in order to create a good environment and lay a solid foundation, we should focus on soft factors,like equity incentive and characteristics of top management team. The result shows that through establishing a appropriate executive incentives,improving the education level of executive team, controlling the size of senior management team and age diverse can improve internal control quality. This paper helps listed companies to improve the internal control quality and provides reference for establishing reasonable equity incentive plan and personnel selection and training.