Research On The Quality Of Executive Compensation And Internal Control

In recent years,a series of events,that accounting scandals leading to the bankruptcy of listed companies,have occurred at home and abroad,which reflected the existence of a lot of defects and flaws in the internal control of listed companies.Governments realized the importance of strengthening the internal control,so the United States government published the "Sarbanes Oxley act" and a series of laws and statutes for enterprises to steady internal control,improve the supervision and management of the company.China's Ministry of finance,the CSRC and other ministries have successively published the "internal control norms" and a series of internal control related laws and regulations,meanwhile scholars began to note and study internal control and made lots of achievements.However,few people studied the influence of executive compensation on the quality of internal control,just from the perspective of executive compensation.Under this background,exploring the quality of internal control,the influence of executive compensation on the quality of internal control,the mediation role of executive power,has an important significance to improve the internal control of enterprises,improve the quality of internal control and to enrich the research of the existing theories and research methods.In this paper,we extracted the data of listed companies from 2013 to 2015,made executive power as the starting point,selected five executive power reflected indicators such as size of the board of directors and used principal component analysis to make a comprehensive analysis of the five indicators,as well calculate the comprehensive score of executive power.Combined with the principal-agent theory,incentive theory,internal control theory and management power theory,the paper analyzes the influence of executive compensation on the quality of internal control,and the mediating role of executive power.Executive compensation was classified to two aspects including short-term compensation and long-term compensation,and the quality of internal control was measured by the Di Po internal control index.Moreover,the intermediary inspection model was established based on the results of previous studies and examined the mediating effect of executive power on the relationship between executive compensation and internal control.The following conclusions are drawn from this study:(1)The short-term compensation is positively related to the quality of internal control,and the long-term compensation is positively correlated with the quality of internal control.(2)There is a positive correlation between executive compensation and executive power,and long-term compensation is positively correlated with executive power.(3)Executive power plays an incomplete mediating role in the influence of short executive compensation on the quality of internal control,and it plays a full mediating role in the influence of long executive compensation on the quality of internal control.