Research On The Influence Of Promotion Incentive On Inefficient Investment

The report of the 19 th CPC national congress pointed out that socialism with Chinese characteristics has entered a new era.China's economy is in a critical period of transforming old drivers from new ones,optimizing the industrial structure and highlighting social contradictions.Over the past four decades of reform and opening up,China has gone global as much as it has brought in.It has become the world's second largest economy and has gone through the transformation from a manufacturing power to the world's largest Internet user.Along with the rapid development of economy,the problem of investment efficiency of enterprises can not be underestimated.Under the enterprise management system with two rights separated,the principal-agent relationship between managers and owners and the current situation of information asymmetry are the root causes of conflicts of interests between managers and owners.If the conflict between the two can not be effectively resolved,it will have adverse effects on both managers and owners.On the management side,it leads to inefficient investment,that is,deviation from optimal investment level,including overinvestment and underinvestment.Managers will use their dominant power over investment decisions to invest in investment projects beneficial to their own interests,even if the net present value of the project is negative,resulting in excessive investment.Similarly,in order to reduce the personal cost as much as possible and bear less investment risk,even if the net present value of the project is positive,it still chooses to give up the investment,resulting in insufficient investment.On the owner side,it leads to the damage of the owner's personal and business interests.The orderly and efficient management and operation of an enterprise are inseparable from the executive team with professional skills and teamwork.Incentive mechanism plays an important role in guiding the interests of managers and owners to converge,which can alleviate principal-agent conflicts and achieve mutual benefit and win-win results between managers and owners.The incentive mechanism in corporate governance is divided into explicit incentive mechanism and implicit incentive mechanism.Promotion incentive is a representative incentive factor in hidden incentive.The so-called promotion incentive refers to the enterprise leaders promote senior executives to higher positions and motivate them toreduce agency costs and improve enterprise performance.It can not only select and reserve talents for the development of enterprises,but also guide and influence the investment behavior of enterprise executives,motivate them to work in their positions and manage their policies,which is conducive to improving enterprise performance and promoting the common development of employees and enterprises.Existing research mainly around the promotion incentive and corporate performance,risk bearing,and substitution of salary incentive and the promotion incentive as one of the recessive incentive mechanism in the executive incentive factors,research the relationship between executive incentive and other economic activities,but neglected the investment decision-making and investment efficiency in promotion incentive and enterprise performance between the communication medium.This is not conducive to revealing the ways and root causes of managers' promotion incentive affecting enterprise performance.Therefore,this paper focuses on the transmission mechanism of promotion incentive affecting enterprise performance,that is,how the existence of promotion incentive in listed enterprises affects the non-efficiency investment of enterprises,and whether there is inhibition or promotion effect.The main problems analyzed and studied in this paper include(1)how the promotion incentive affects the overinvestment of enterprises and whether it can restrain the overinvestment behavior of enterprises.(2)the influence of promotion incentive on enterprise underinvestment and whether it can improve the phenomenon of enterprise underinvestment.(3)whether there is a difference in the degree of influence of promotion incentive on the non-efficiency investment of enterprises with different property rights between state-owned enterprises and non-state-owned enterprises.This paper selects the financial data of Shanghai and shenzhen a-share listed companies from2013 to 2017,and conducts an empirical study on the relationship between promotion incentive and inefficient investment,so as to illustrate the economic consequences caused by promotion incentive.This paper USES normative analysis method to conduct literature review on relevant researches on promotion incentive and non-efficiency investment at home and abroad.Secondly,it defines the concept and explains the theoretical basis of this paper in detail,including incentive theory,information asymmetry theory and principal-agent theory,and then puts forward theoretical analysis.And put forward the hypothesis on the basis of theoretical analysis.Finally,empirical analysis is used to establish the model,and the conclusions are as follows:(1)through the research on the relationship between promotion incentive and overinvestment,the promotion incentive intensity of corporate executives is negatively correlated with the level of overinvestment.It can be seen that the higher the promotion incentive intensity is,the more restrained the excessive investment behavior of enterprises will be.(2)through the research on the relationship between promotion incentive and insufficient investment,the promotion incentive intensity of corporate executives is positively correlated with insufficient investment,and the correlation is not obvious.It can be seen that the increase of promotion incentive intensity will promote the underinvestment behavior of enterprises.(3)divide state-owned enterprises and non-state-owned enterprises.Compared with state-owned enterprises,the negative correlation between promotion incentive and overinvestment is more significant in non-state-owned enterprises.Whether state-owned or non-state-owned enterprises,promotion incentive has little impact on the lack of investment.In this paper,the promotion incentive in the hidden incentive mechanism of corporate governance is taken as the research object alone,and the relationship between it and non-efficiency investment is studied from the perspective of the difference of property right nature.In order to improve the current non-efficiency investment status,it is conducive to the rational use of promotion incentive system to promote the better development of enterprises,to improve the construction of enterprise senior management team,and to enrich the research on the difference in the nature of property rights in the field of corporate governance.