Research On The Relationship Between Incentive Of Division Managers And Resource Allocation Efficiency Of Internal Capital Market

Information asymmetric and insufficient of division managers’ efforts are the main points of the resource allocation efficiency of internal capital market (ICM), the headquarters can solve these two problems through designing the optimal mechanism to encourage division managers. This dissertation depicted the relationship among ICM resource allocation efficiency, incentive of division managers and information rents by the method of optimal programming model and game theory, then on this basis, added the characteristics of state-owned enterprises, and finally concluded the optimal incentive mechanism which including perquisite consumption, salary and share incentives under the condition of asymmetric information.Based on the mathematical model, this dissertation took the financial data of state-owned conglomerates listed in Shanghai and Shenzhen Stock Exchange to make an empirical analysis by the single equation and simultaneous equations model. The conclusion showed a notable negative correlation between perquisite consumption of division managers and ICM resource allocation efficiency, and a notable positive correlation between salary of division managers and ICM resource allocation efficiency. But the positive relationship between share incentives of division managers and ICM resource allocation efficiency is not notable. At the same time, the diversification of ICM can notably intensify the negative relationship between perquisite consumption of division managers and ICM resource allocation efficiency.This research showed that the "payment-performance contract" had already been fulfilled. Reasonable and effective incentive can be the dynamic and constraint for division managers. But in general, the incentive and constraint mechanism in our country still need to be improved. Especially for the incentive of division managers, creating a positive competition mechanism to enlarge the whole valuation of conglomerate is the most important aspect.