Research On The Effect Of Executive Compensation Structure On The Internal Control Material Weaknesses Of Listed Companies

The effectiveness of internal control is determined by material weakness in internal control(ICMW),which will affect the long-term development of enterprise.More and more scholars have been concerned on what influence ICMW.Executive is regarded as the establisher and executor of the internal control of one enterprise,whose compensation structure is reasonable and effective or not,is the key to influencing the internal control system of the enterprise.Therefore,scientific and reasonable executive pay structure may reduce the possibility of ICMW.In addition,the heterogeneity of top management team in the age,tenure,education will cause that person's experience,risk preference and thinking mode have large differences,and then affect the design and operation of the internal control system.This thesis reviews the related literature both at home and abroad,takes the delegate agent theory,incentive theory,tournament theory and behavior theory,analyzes the influence of executive compensation structure on the material weakness in internal control from three aspects of the constitution,ratio,and gap.And on this basis,combined with the upper echelons theory,the thesis analyzes the moderating effect of TMT heterogeneity on the relationship between executive pay structure and the material weakness of internal control.This thesis selects listed companies that exist ICMW in 2010-2014 and do not with similar year,industry and size as the research object.Finally the 146 companies is chosen,and empirical research is done with related sample data.The results show :(1)short-term executive compensation and the proportion of long-term executive compensation have a significant negative impact on the ICMW,the executive compensation gap has a significant positive impact on material weaknesses in internal control.But the long-term compensation has no obvious impact on ICMW.(2)taking moderating of TMT heterogeneity into account,the results are as following: the TMT age heterogeneity becomes higher,the negative relationship between the short-term compensation and ICMW will be stronger.The TMT tenure heterogeneity becomes higher,the negative relationship between the short-term compensation and ICMW will be stronger,the negative relationship between the short-term compensation and ICMW will be stronger,and the positive relationship between the compensation gap and ICMW will be stronger.The TMT education heterogeneity becomes higher,the negative relationship between the short-term compensation and ICMW will be stronger,the negative relationship between the short-term compensation and ICMW will be stronger,and the positive relationship between the compensation gap and ICMW will be stronger.Finally,according to the research results,this thesis puts forward some suggestions: optimize the structure of executive compensation,increase the heterogeneity of top management team,improve the transparency of executive compensation disclosure,and improve the executive compensation assessment system.The innovation of this thesis includes:(1)focus on the influence of executive compensation structure on the material weakness of internal control.(2)incorporation of the TMT heterogeneity to the relation model of executive compensation structure and ICMW,and analysis of its moderating effect,which broaden the research perspective of the executive structure further.