Research On The Effectiveness Of The Internal Controls Impacting On The Sensitivity Between The Executives’ Pay And Corporate Performance

In recent year,there are many financial frauds happenend in listed companies in China.It seriously hindered the healthy development of the capital market.I think the reasoen is the internal control of company is defective.In reality,executive pay and company achievements is related in many enterpises especially in state-owned enterprises.They have the opportunity to make their own interests superior to the interests of the company.The constraints and control on executive iscompromised and the mechanisms of executive pay and performance-related can not function effectively. Effective internal control can increase the behavior of corporate executives constraint,reduce the incidence of self-interested behavior,so there is a certain basis between executive pay and corporate performance,executive pay can well reflect the company’s profitability.The main content of this paper includes the following parts.The first part is introduction,an overview of the research background.The second part is the literature review.The third chapter is theoretical analysis and assumptions.Combined with previous studies,the relevant theory on executive behavior and internal control were analyzed,and the research hypothesis and design models on this basis,to provide a theoretical basis for further research.The fourth chapter is the empirical research design.The fifth chapter is the analysis of empirical tests and results.The sixth chapter is the conclusion and recommendations.Summary of articles and further recommendations for listed companies in China executive compensation and internal control mechanisms.This paper draws the following conclusion.First, corporate performance and executive compensation showed a significant positive correlation,it means the higher the company’s operating performance, the higher executive pay is.Second, the effectiveness of internal control and executive compensation showed a significant positive correlation, that the better the effectiveness of internal control is,the higher the executive pay is.Third, After the company’s operating performance and the effectiveness of internal control of the cross-term added to the model,through its wholly empirical test sample,we find the effectiveness of internal control and executive pay performance sensitivity showed a positive correlation between that effective internal control can enhance executives sensitivity performance.Then,this article will be divided into government-controlled listed companies and non-governmental control categories, sub-sample after the empirical discovery:Compared with non-government-controlled listed companies,listed companies in the government-controlled internal validity and between executive pay performance sensitivity control the correlation is more significant.