Research On The Influence Of Executive Incentive On Inefficient Investment

The ultimate goal of the enterprise is to maximize the value and create shareholder wealth,the realization of it greatly depends on whether the investment activities are effective.However,as the current capital market in China is still not perfect,information asymmetry and principal-agent problem are ubiquitous,and most enterprises have the problem of inefficient investment.In order to inhibit the occurrence of inefficient investment in the enterprise,internal and external governance appear particularly necessary.Among them,as one of the important means of internal governance mechanism,executive incentive plays a crucial role in improving investment efficiency and realizing the ultimate goal of the enterprise.Throughout the domestic and foreign literature,much of the research on the economic consequences of executive incentive is limited to the direct impact of single executive incentive,in recent years,there are also some literatures which focus on the comprehensive governance effect of executive explicit incentive combination,but they overlook the role of executive implicit incentive.Therefore,under the background of system in China,this thesis introduces implicit incentive into the research framework of executive incentive,and explores the relationship between executive incentive and inefficient investment based on dual perspectives of explicit and implicit incentives.In this thesis,compensation incentive and equity incentive are selected as the proxy variables of executive explicit incentive,and perks is selected as the proxy variable of executive implicit incentive.First,theoretically analyzing the direct correlation between executive incentive and inefficient investment,including explicit incentive and implicit incentive,and on this basis,further studying the effect of interaction between executive explicit incentive and executive implicit incentive on inefficient investment under different nature of property right.Then,putting forward the relevant research hypotheses,and building empirical models to verify.Finally,drawing the conclusions.The study finds that compensation incentive and equity incentive which belong to executive explicit incentive both can inhibit inefficiency investment,while perks which belongs to executive implicit incentive will aggravate inefficiency investment.It is further found that the interaction between compensation incentive and perks,and between equity incentive and perks both are significantly negatively correlated with inefficient investment,however,after distinguishing between state-owned enterprises and non-state-owned enterprises,this negative correlation still exists in state-owned enterprises,but it is not supported in non-stateowned enterprises.The contribution of this thesis lies in: extending the research of the relationship between executive incentive and inefficient investment from single incentive factor effect to the comprehensive effect,and deeply comparing the differences in the comprehensive effect of executive incentive between state-owned enterprises and nonstate-owned enterprises.It not only enriches the research results of executive incentive and inefficiency investment,proposes a new research perspective,but also provides more abundant theoretical support and empirical evidence for enterprises to improve the effectiveness of executive incentive mechanism and investment decisions.