Research On The Influence Of Executive Compensation Incentive On Investment Resource Allocation Decision

The allocation of investment resources is not only the object of macroeconomic policy adjustment,but also the distortion effects in micro enterprises can not be ignored.The company's investment decisions,especially the investment decisions about the allocation of investment resources,which are very important for the future development of the enterprise.Executive compensation and corporate investment decision has been an important research direction of corporate finance in recent years.Whether the executive compensation system of Chinese listed companies can effectively alleviate the agency problem and improve the performance of the company is a hot issue that many scholars have studied.The traditional principal-agent relationship between the shareholders and managers focusing on how to set up the incentive compensation,using empirical research methods to explore the relationship between executive compensation incentives and corporate investment decisions,in fact,endogenous incentive contracts will also have an impact on the company's investment decisions.The paper constructs the relationship model between executive compensation incentive and corporate investment resource allocation decision,and explores the intrinsic influence relationship by adding risk selection,managers' private interests and financing constraints.We established the output function of manager's effort and investment decision,and used principal agent analysis framework,and based on the effort sharing situation of the same incentive intensity and the substitution of different incentive intensity,this paper explains the influence mechanism of executive compensation incentive on the allocation of investment resources.Taking into account the opportunism behavior of managers,we explain the distortion effect of manager's private interest on the allocation of investment resources.In the face of financing constraints,it is necessary to further adjust the incentive strategy which will improve allocative efficiency of investment resources.Numerical analysis is performed using empirical data assignments,and verifying the hypothesis of the model on the basis of the control variables.In the dynamic game process of managers and shareholders,we revealed the correction mechanism of executive compensation incentive to the deviation of investment objectives and risk mismatch,and it provided theoretical enlightenment for relevant empirical research,we also provided policy implications for setting up executive compensation contracts and supervising senior executives.This study found that:(1)the relationship between the optimal incentive intensity to the managers and investment level,investment returns,investment risk is inversely proportional,and the optimal incentive intensity of managers is directly proportional to the risk aversion coefficient of managers;(2)In the risk situation,the optimal incentive intensity of high-risk projects is more sensitive to the level of investment.At the same time,raising the investment level of a project will lead to the reduction of the optimal effort of managers on the project;(3)When the manager has tunneling behavior to the low-risk project,the best strategy for shareholder is to increase the incentive intensity and reduce the investment level;(4)When the problem of financing constraints exists,as the incentive intensity changes,the allocation of resources of high-risk projects and low-risk projects will change,that is the effect of resource transfer.