Research On Internal Control Self-Assessment Of Equity Incentives Of Listed Companies' Executives In China

Executives'equity incentives have been more and more widely recognized and used by the listed companies of China, also made positive contributions to the development of enterprises as an effective tool which can mitigate the inconsistency of interests between executives and shareholders. But we should also realize that there are many loopholes and risks in the system of executives'equity incentives at the present stage. For example, the executives who have got equity incentives shares would probably have the motivation to make financial fraud or tout companies'performance to pull up the price of shares and reap staggering profits. It is obvious that the results of implementing executives'equity incentives are likely contrary to what the shareholders expect if there is no sound internal control system. The executives'equity incentives may not only fail to have positive effects on stimulating the executives, but also increase the company's financial and operational risks. The effectiveness of internal control relies heavily on companies'assessment on the results of internal control—Control Self-Assessment.Firstly, the paper reviewed the domestic and international research literature related to executives'equity incentives and internal control self-assessment. On this basis, the paper analyzed and summed up the risks of internal controls which were divided into the following four parts in accordance with the targets of internal control:The risk of failing to increase the organizations'effectiveness and efficiency; the risk of affecting the reliability of financial reporting; the risk of failing to comply with the relevant laws, regulations and contracts; the risk of endangering asset security. After that, the paper selected the listed companies which implemented executives'incentive shares between 2006-2009 as samples and established multiple regression model to make empirical research on the main factors which influence the level of executives'equity incentives. The results showed that the policy-making related to equity incentives of listed companies'executives mainly do not meet the requirements of scientificity and rationality, and even illegal. Finally, on the basis of the research results mentioned above, this paper generated series of measures on control self-assessment of executives'equity incentives which have universal applicability and effectiveness in listed companies and made some suggestions on improving the companies'internal and external environment as well.