Internal Control Quality? Management Compensation Incentive And Corporate Risk-taking

Increasing fluctuations of the macro financial background in recent years push the requieement of corporate risk-taking ability of executives.Whether the company's executives can make an objective decision and improve the level of risk-taking under compersation incentive way that needs to be researched. Increasingly perfect internal control system in China at the same time,the quality of internal control for higher risk-taking behavior and its influence to its executives company are also the main research contents in this paper.Corporate risk-taking means that executives can accept those with high risk of investment projects, but the net present value greater than zero can help to improve the value of the company. Executives, however, as the company's decision makers, usually are unwilling to take more risks and need considerable compensation incentive to motivate executives work enthusiasm and take on more risk,because the risk cannot be scattered(Shi Dalin, 2014) and the return that executives get from the risky investment is very limited, if the investment fails,which will also lose their human capital(Coleet al.,2011). Compensation incentive is considered to be ease principal-agent problems,encourage executives to work hard and improve an effective mechanism of the value of the company(K.J.M urphy, 2003). At the same time executive performance evaluation and compensation incentive is the important component of enterprise internal control specifications, along with released in May 2008 the enterprise internal control basic norms in our country opened the prelude of the internal control in our country,more perfect internal control system appears.it needs more and more strict and complete requirements of internal control from system level.Standing under the Chinese special national condition, this paper studies the explicit and implicit compensation of executives about the company's risk-taking and use the internal control condition variables to study whether more perfect internal control requirement of the external environment have an impact on executive compensation incentives, which affects the company risk-taking ability.Academics on reviews of the literature found that influences of executive compensation incentives on corporate risk-taking mainly concentrated in special industries such as banking and mainly focuses on the executive explicit compensation incentive. Considering the executive implicit compensation incentive is mainly from improving company performance point of view.There is no research on the company's risk-taking influence and don't consider the factor of internal control quality improvement at the same time. This paper has carried on the comprehensive consideration. Based on the listed companies of Shenzhen and Shanghai two stock market A-share form 2012 to 2014 as research samples,from explicit compensation incentive and implicit compensation incentive two dimensions to fully study the effect of executive compensation incentive on the corporate risk-taking. At the same time for the first time considering the quality of the internal control of company internal executive's risk-taking behavior. In this paper, the results show that executives in explicit and implicit compensation both can improve the corporate risk-taking. In addition, compared to the low quality of internal control, the high quality of internal control of company's executives explicit and implicit compensation have a positive relationship with the corporate risk-taking ability.That is to say, the company's internal control quality improvement can strengthen the positive influence of explicit and implicit compensation on risk-taking ability and in the reverse compensation incentive effect will be greatly discounted, so the company needs to improve the quality of internal control. The final research conclusion is that the government should further improve the internal control related to executive compensation incentive system.At the same time, the listed company's first priority is to fully arouse the enthusiasm of executives work, and relieve the principal-agent problems, improving the quality of the company's internal control to adapt to the ubiquitous market risk.