Governance Mechanisms,Strategic Radicalization And Financial Irregularities

Financial irregularities have always been one of the key concerns of academia and the field of capital market governance.The frequent occurrence of violations is pulling the emotional nerves of the capital market and investors.The long-term development of the company is detrimentally impacted by the repercussions of violations scandals,and the interests of ordinary investors are further detrimentally affected.Financial violations have become a malady that has a detrimental effect on the healthy growth of the capital market.The agency problem is exacerbated by enterprises,who have chosen aggressive strategies to gain competitive advantage,leading to repeated financial irregularities;however,strategy has a considerable influence on business management,financial and other decisions,which in turn affects the company’s behavior and performance.How to restrain corporate violations is particularly important.Previous studies have shown that the quality of corporate governance mechanisms directly determines the success or failure of a company’s daily operations,and also affects its long-term development in the future.A corporate governance system of the highest caliber can significantly enhance the productivity of both management and shareholders,foster diligence and accountability,and prevent certain personnel from engaging in partial violations in pursuit of personal gain.It is thus essential and vital to devise a successful governance system for businesses to effectively avert and control financial malfeasance and to protect the rightful interests of all investors.For the past decade,this article seeks to explore the correlation between strategic incentive advancement and financial irregularities,both theoretically and empirically,by utilizing data from Chinese listed companies from 2012 to 2021.Moreover,the principal component analysis technique of SPSS software is employed to create comprehensive indicators of governance.mechanisms,and they are included in the framework of strategic incentive progress and financial irregularities research to see whether they can effectively prevent and govern financial irregularities.Further comparative analysis of heterogeneity is conducted in different property rights,internal control quality,and different business risks.The main research conclusions are as follows: Strategic aggressive progress is significantly positively correlated with financial irregularities,and the more aggressive a company adopts a strategy,the greater the probability of financial irregularities;The establishment of reasonable incentive and restraint mechanisms by companies can significantly curb financial irregularities;"Both high deposit and loan prices have played a partial mediating effect between strategic acceleration and financial irregularities.".Through comparative analysis of heterogeneity,it is found that in state-owned enterprises,incentive mechanisms have good governance effects and can effectively reduce the probability of financial irregularities,but the constraint mechanism is not significant;In non-state owned enterprises,both incentive and constraint mechanisms can effectively curb financial irregularities.Judging from the high and low quality of internal control,the incentive mechanism and constraint mechanism of enterprises with high quality of internal control can significantly reduce the probability of financial irregularities;In enterprises with low internal control quality,establishing incentive and constraint mechanisms may not effectively prevent and govern financial irregularities.In enterprises with low operational risk,both incentive and constraint mechanisms can play a good role in supervision and constraint,thereby reducing the probability of financial irregularities;In enterprises with high operational risk,due to their own pressure and individual management’s pursuit of selfinterest,even if good governance mechanisms are established,they may not be able to effectively reduce financial irregularities.Based on the research findings,this article proposes the following recommendations:Companies should formulate reasonable strategies based on their own circumstances,not overly aggressive;An enterprise should develop efficient and reasonable business plans and management models based on its own strategic type,give full play to the functions of the management while also playing a supervisory role,avoid financial irregularities in pursuit of self-interested behavior,and develop effective and reasonable incentive and constraint mechanisms based on the company’s own situation;For investors themselves,they should invest cautiously;For relevant supervision and management departments,in addition to strengthening the supervision of companies,they can also encourage and support stable institutional investors to invest,formulate more complete independent director rules,and provide appropriate guidance for enterprises to develop appropriate governance mechanisms.