Managerial Incentives And Corporate Performance

Corporate governance plays an important role in the business development and performance of enterprises,and the core of contemporary corporate governance is to alleviate the conflict of agency between shareholders and executives.In order to reduce the agency cost brought about by the agency conflict,it is necessary for enterprises to implement effective incentives for executives,so the executive incentive mechanism has become an important way of corporate governance.Research and development is directly related to the future competitiveness and survival of enterprises,but in practice,shareholders and senior executives often have differences in R&D decisions.Thus,the difference of executive incentive mechanism will directly affect the efficiency of R&D activities of enterprises,and ultimately reflected in the financial performance.Therefore,how to increase the R&D investment and then improve the financial performance through effective executive incentive mechanism is one of the core issues of this paper.Corporate governance mechanism and internal control,as different levels of corporate governance,are mutually influential and co-effect.As an important internal environment,the establishment and implementation of internal control system will have an impact on the operation of the enterprise,including the implementation performance of the executive incentive mechanism and the financial performance of enterprise.Therefore,the second issue studied in this paper is the role of internal control in the relationship between executive incentive and corporate performance.This paper studies the process of the comprehensive impact of executive incentive and internal control on enterprise performance,and on the basis of theoretical research,combined with the practical activities of Shanghai and Shenzhen A-share listed enterprises,dual fixed effect models are constructed.Then,this paper tested the main effect of executive incentive and corporate performance,the mediating effect of R&D investment in executive incentive and corporate performance and the moderating effect of internal control on the relationship between executive incentive and corporate performance.In every model,the whole sample,the sample of state-owned enterprises and non-state-owned enterprises,the sample of technology-intensive enterprises and non-technology-intensive enterprises are all tested individually.The conclusions of the empirical test are: in general,the executive salary incentive is positively related with the enterprise's financial performance or R&D investment.R&D plays a partial mediating role between the salary incentive and the corporate performance.This partial mediating effect also exists in the non-state-owned enterprises and non-technology-intensive enterprises.In the state-owned or technologyintensive enterprises,the salary incentive is positively related with the financial performance,but the relationship between salary incentive and R&D investment is not statistically significant.In non-state-owned enterprises or technology-intensive enterprises,the quality of internal control has a moderating effect on the relationship between executive salary incentives and financial performance.When the internal control is good,the positive impact of salary incentive on the financial performance will be relatively intensive.Equity incentive is positively correlated with the financial performance,but the correlation with R&D investment is not statistically significant.In technology-intensive enterprises,equity incentive is positively correlated with corporate performance and R&D,furthermore,R&D investment plays a partial mediating role in the relationship between equity incentive and corporate performance.The quality of internal control has a moderating effect on the relationship between the strength of the executive equity incentive and financial performance.When the internal control is good,the positive impact of equity incentive on the financial performance will be relatively intensive.The executive promotion incentive is positively related with the enterprise's financial performance or R&D investment.R&D plays a partial mediating role between the promotion incentive and the corporate performance.This partial mediating effect also exists in the non-state-owned enterprises and non-technology-intensive enterprises.In the state-owned or technology-intensive enterprises,the promotion incentive is positively related with the financial performance,but the relationship between promotion incentive and R&D is not statistically significant.The relationship between control incentive and corporate performance is not statistically significant,the relationship between control incentive and R&D is not statistically significant,either.Thus,the mediating role of R&D is not verified.Based on the conclusion mentioned,enterprises should gradually strengthen the incentive mechanism,which can improve the R&D investment and financial performance.Non-state-owned enterprises and non-technology-intensive enterprises should attach importance to the positive influence of executive salary and promotion incentives,raise the level of pay gap moderately,maintain strong promotion incentives.Technology-intensive enterprises should pay attention to the role of executive equity incentive mechanism.About the executive control incentives,companies need to consider the necessity of control incentives.Enterprises should promote the disclosure of internal control information,establish the internal control system,improve the quality of internal control,especially for the technology-intensive enterprises or non-state-owned enterprises.Because their internal control quality has a moderating role on the relationship between executive salary incentive and corporate performance.