Research On The Impact Of Compensation Gap In Top Management Team On The Effectiveness Of Internal Control

As one of the effective ways to improve the modern enterprise system,internal control plays an important role in improving the operation management level and avoiding risks of listed companies.In China,the construction of internal control system started late,the relevant regulations and rules still exist defects,the effect of internal control implementation is lack of effective supervision,and the effectiveness of internal control is not high.This situation has attracted wide attention from the theoretical and practical circles.As the actual operator of the enterprise,the senior managers are responsible for the design,execution and maintenance of internal control,and the role in the construction of internal control is particularly important.Their initiative in the process of internal control is driven by a series of behavioral factors.According to the"championship theory" proposed by Lazear and Rosen in 1981,the internal compensation gap in the listed companies will stimulate the senior executives at a relatively low level,and then affect the individual behavior of the senior executives.Whether the gap will further affect the effectiveness of internal control is worth exploring.In state-owned enterprises,senior managers may place more emphasis on political promotion opportunities.The incentive effect of pay gap may be weakened in state-owned enterprises.In addition,the manager's power theory believes that senior managers may use power to seek rent to maximize their own salary levels-The incentive effect of the internal compensation gap maybe is different from the incentive effcet which is under normal circumstances.Facing the trend of widening pay gap in China,it is very necessary and urgent to study these problems.Therefore,on the basis of principal-agent theory,tournament theory,fair theory and manager power theory,this paper will combine the two research methods of normative and empirical research to explore the effect of internal compensation gap on internal control effectiveness,and further investigate whether the relationship between the two will be affected by the authority of the managers.And the possible differences between state-owned enterprises and non-state-owned enterprises.This article is divided into five chapters.The first chapter is the introduction,which introduces the background of the research and its theoretical and practical significance,and reviews and summarizes the relevant literature on the internal compensation gap of senior executives,the effectiveness of internal control and the authority of the managers.Finally,it expounds the research ideas,methods and innovation of this paper.The second chapter is the related basic theory,which defines the relevant concepts involved in the study,and introduces the theories of principal-agent theory,fair theory,tournament theory and so on.The third chapter is the theoretical analysis and research hypothesis.Based on the analysis of the effectiveness of internal control and the internal compensation gap in the listed companies in China,the mechanism of the effect of:internal compensation gap on internal control effectiveness is discussed,and the differences which caused by managers' power and the property rights of the enterprise are discussed.The research hypothesis of this article is further put forward.The fourth chapter is the empirical study.In this study,the A-share listing of Shanghai and Shenzhen Stock Exchanges from 2008 to 2016 are selected as research samples.The regression models are constructed,in order to verify the correctness of this research hypothesis.Finally,the fifth chapter comes to the conclusions of research and raises some policy proposal.At last,it mentions the deficiencies and prospects of the research.The findings are as follows:(1)there is a significant positive correlation between the internal compensation gap and the effectiveness of internal control.That is,the greater the internal compensation gap is,the higher the effectiveness of internal control will be.(2)Compared with state-owned enterprises,The effect of executive compensation gap on the effectiveness of internal control of non-state-owned listed companies is more obvious.(3)The greater the managers,power,the positive relationship between the internal gap of executive compensation and the effectiveness of internal control is weakened.This shows the incentive effect of the salary gap which is pull up forcibly is weaker.