The Influence Of The Implementation Of Equity Incentive On The Effectiveness Of Internal Control

As a long-term incentive method,equity incentive is regarded as a powerful tool to promote the management to pay attention to the long-term interests of the enterprise and maximize the value of the enterprise.Equity incentive plays an important role in solving the principal-agent problem,perfecting the corporate governance structure and retaining the core members of enterprises.Equity incentive originated in the United States in the 1970 s and spread to China in the early 21 st century.China has introduced various related policies around 2006,which provides a good opportunity for Chinese enterprises to implement equity incentive plan.Accordingly,a large number of domestic enterprises have implemented equity incentive plan.At the same time of the improvement of relevant policies on equity incentive,China also introduced relevant policies and norms of internal control successively in 2008,constructed a standard internal control system in China,and also highlighted the importance of internal control in corporate governance.At present,a large number of Chinese scholars have done a lot of research on the market reaction of equity incentive.The research finds that equity incentive has a certain influence on the effectiveness of internal control of enterprises in addition to the above functions.However,domestic and foreign scholars have not reached a unified conclusion as to whether this effect is positively correlated or negatively correlated.Therefore,this paper takes equity incentive as the entry point to explore its influence and direction on the effectiveness of internal control.At present,restricted stock and stock options are the most common equity incentive methods in listed companies in China.By sorting out the research of Chinese and foreign scholars,it is found that restricted stock has a more significant incentive effect on internal control.As the unlocking conditions of restricted stock are stricter,the management will consider the long-term goals of the enterprise,reduce speculative behaviors and improve the internal control mechanism of the enterprise in order to achieve the unlocking conditions.Therefore,this paper believes that compared with stock options,restricted stock has a stronger positive incentive effect on the effectiveness of internal control.In addition,because the equity incentive most of state-owned enterprises with welfare nature,representing the rent-seeking behavior of administrators,and the proportion of stateowned enterprises due to motivate and inspire yields more subject to the conditions of policy,equity incentive to welfare,the lack of incentives,by contrast,non-state enterprise’s equity incentive plan design more reasonable,tend to be inspirational,and equity incentive effect is more pronounced;Because of the core staff can more directly in contact with the enterprise daily business,to improve business performance,increase the innovation output has outstanding contribution,so in recent years,more and more enterprises pay attention to the core staff incentive,equity incentive for the core employees to improve the effectiveness of the internal control has a more significant role in promoting.Based on the deep Shanghai two cities in 2015-2019 a-share listed companies as samples,literature induction,the empirical study method,quantitative analysis and qualitative analysis to explore the implementation of equity incentive and the intensity of the implementation of equity incentive effectiveness of the internal control level,the influence of the equity incentive and further divided into restricted stock and stock options to explore its correlation with internal control effectiveness respectively.The main research conclusions are as follows:(1)On the whole,compared with the listed companies without equity incentive,the listed companies with equity incentive plan have a higher level of effectiveness of internal control,and the lower the probability of internal control defects;And with the improvement of the intensity of equity incentive,its positive incentive effect on the effectiveness of internal control is greater;(2)From the perspective of different equity incentive methods,restricted stock has a positive incentive effect on the effectiveness of internal control,while the relationship between stock options and the effectiveness of internal control is not significant;(3)From the perspective of enterprises with different equity properties,the effect of equity incentive is weaker for state-owned listed companies in China due to the more restrictions they are subject to.Therefore,compared with state-owned listed companies,the implementation of equity incentive in non-state-owned enterprises can better improve the quality of internal control of enterprises,and the strength of equity incentive is positively correlated with the effectiveness of internal control,while the relationship is relatively weak in state-owned enterprises;(4)From the perspective of different equity incentive objects,the incentive effect is also different.The target of enterprise equity incentive plan is mainly senior executives and core employees,and the implementation of equity incentive for both can effectively improve the effectiveness level of internal control.However,when the proportion of core employees is relatively high,the promotion effect of equity incentive on the effectiveness of internal control is more significant.Based on the above analysis results,this paper puts forward the following conclusions:strengthen the internal management of enterprises,improve the construction of internal control system;Actively implement equity incentive plan,improve the effectiveness of internal control level;The equity incentive method is mainly restricted stock,which can maximize the effectiveness of internal control.The effect of equity incentive is more significant in non-state-owned listed companies,but it still has a certain positive effect in state-owned listed companies.The object of equity incentive should not be limited to the management,and it is equally important to the core employees.