Research On The Relationship Of Executive Compensation Gap、Internal Control And Inefficient Investment

Whether in the field of corporate governance or managers’ behavior,corporate investment activities have always been a key research topic.From a micro perspective,investment behavior affects the sustainability of the enterprises’ operation,and the level of investment efficiency impacts the financial status and performance.From a macro perspective,it is related to the overall economic development of a country.Separation of management and ownership,however,leads to the principal-agent problems between owners and operators.Agency conflict and information asymmetry make managers have game advantage.Therefore,managers will choose investment projects that satisfy their own interests out of selfish motives.This motivation leads to inefficient investment behaviors such as over-investment or under-investment,which will damage the interests of stakeholders and the long-term development of the company.As a key link connecting the owners and operators of an enterprise,executive compensation system encourages managers to perform their duties diligently and adjusts the conflict of interest between them.As an important part of the corporate compensation system,the compensation gap of senior executives directly affects executives’ perception of the fairness of remuneration.However,there are few studies on how the compensation gap affects executives and investment efficiency,and the conclusion has not yet been reached.Therefore,how to make the executive compensation gap play a positive governance effect and optimize the compensation system is an important research goal and a new research direction to solve the problem of inefficient investment.In addition,the excessive power of executives can easily lead to overconfidence,so their powers must be restricted.Internal control system,as another supervision mechanism,constrains managers’ behavior and further affects the quality of investment projects.Enterprises with different property rights attach different importance to internal control system and have different implementation effects:State-owned listed enterprises have a higher degree of separation of ownership and management and greater supervision of salary incentives.Non-state-owned enterprises are subject to vast credit guarantees in financing sessions,and insufficient investment will also occur.Therefore,this article explores whether the internal control has a different moderating effect on the relations of executive pay gap and inefficient investment in companies with different property rights,in order to enrich relevant results and expand research space,which has research significance.This article uses the data of A-share Chinese listed companies from 2015 to 2019 as a sample,establishes an empirical model,and completes relevant tests and analyses.The empirical results show that:(1)China’s listed companies have both over-investment and under-investment.Comparatively speaking,the latter is more common.(2)The executive compensation gap has a significant inhibiting effect on both types of inefficient investment.(3)The higher the level of corporate internal control is,the stronger the inhibitory effect of the executive pay gap on inefficient investment will be.Among them,the moderating effect of internal control is more significant in the over-investment sample,while there is no significant difference in the under-investment sample.(4)The moderating effect of internal control is different in companies with different property rights:In non-state-owned enterprises,internal control can effectively enhance the inhibitory effect of the executive pay gap on inefficient investment,which has a significant inhibitory effect on over-investment but no significant moderating effect on under-investment.The moderating effect of internal control in state-owned enterprises is not obvious,and the main reason is that compensation incentive plays a leading role in inefficient investment behavior.This article will be introduced in the following six chapters.The first chapter is the introduction.This chapter explains the research background,research purpose,significance,method,content,research framework and originality.The second chapter is a literature review,which summarizes domestic and foreign researches on executive compensation gap,inefficient investment,internal control from the aspects of meaning,influencing factors and governance mechanism.The third chapter is the theoretical analysis and research hypothesis.Based on principal-agent theory,tournament theory and social equity theory,this chapter puts forward hypothesis.The fourth chapter is research design,which introduces the selection of samples and data sources,the definition of research variables,the establishment of models.The fifth chapter is the empirical test results and analysis.In this part,descriptive statistics,correlation analysis,multiple regression analysis and robustness test of regression results were carried out on the samples.The sixth chapter is the research conclusion and countermeasures.This chapter puts forward research conclusions,and provides suggestions for improvement of the salary system,the optimization of investment efficiency and reform of internal control system of listed companies with different property rights in China.Finally,this chapter points out shortcomings and makes prospects for further research.