The Research On Influence Of Managers' Salary On Enterprises' Capital Structure

Through analysing how managers' salary structure influences a company's capital structure, this paper argues the necessity and feasibility of implementing a mature and competitive salary incentive mechanism for managers in China's small and medium-sized enterpriseBased on qualitative analysis of managers' incentive salary mechanism, this paper gets the numerical solution of the optimal capital structure of SMEs through risk-neutral pricing model. Then the author uses quantitative analysis to discuss the influence of market friction and company cash flow's volatility on the company's capital structure and bond premium, the influence of managers' salary structure and external income on company's optimal capital structure and risk premium, the impact of some stock equities and opportunity returns on the interest conflict between managers and shareholders, and the relationship between guaranty contract design parameters and the managers' salary and financing scale, etc.Numerical calculation results show that: with constant bond financing scale, if managers choose projects with higher risk, they will get more value, and the enterprise's equity value will increase at the same time, but the value of bonds decreases, so managers have strong motivation of risk shifting; with the increase of coupon, the value of the company will first increase and then decrease. With the increase of corporate leverage, the bond risk premium increases; with no leverage, the timing of managers' give-up has nothing to do with coupon. With the increase of fixed salary, managers' salary value, the value of their bonds and corporate value increase, the company's financial leverage reduces, and bond credit premium also decreases. As managers get more equity shares, their salary value and the value of the company's equity increase; the bond value and the value of the company reduces; the company's financial leverage and bond credit premium also decrease;the abandonment level of manager and the value of option increases,and the optimal coupon decrease.Assuming that company's capital consists of equity and permanent debt capital based on the guarantee agreement, managers' salary consists of equity and fixed salary, and the bonding company is responsible for part of the debt risk. The analysis shows that managers' motivation of risk transfer increases with the increase of their equity shares and opportunity returns, decreases with the increase of bonding company's guarantee proportion, and decreases with the increase of fixed salary.