Executive Pay, External Audit Quality And The Efficiency Of Investment

Enterprise financial management in modern economic development of the three core plate are respectively the enterprise financing management, profit distribution management and investment decisions, and because the enterprise is more depend on the distribution of the fund investment and operation, in turn, increase revenue, improve enterprise value, increase shareholders’ wealth, thus investment decision-making is become the most important sector of enterprise financial management, investment efficiency of high and low for the growth of enterprises is of great significance. Yet is common in our country enterprise investment efficiency is low, there is excessive investment and inadequate very unreasonable inefficient investment behavior. So the efficiency of investment behavior is studied for analysis of the formation reasons and puts forward some practical and effective governance mechanism is currently an urgent and important task. In modern corporate governance as a result of the existence of the two rights separation of ownership and managerial authority, makes the investment decisions in the hands of executives and investment efficiency depends on executives more wisdom, knowledge and attitudes. According to the enterprise in the problems of principal-agent and asymmetric information, moral hazard and adverse selection is likely to happen. Conflict of interest between executives and shareholders, for example, executives of enterprise resource control, and the shareholders enjoy benefits claims, if executives gain benefits from investment projects is lower than the cost of investment decision-making cost, executives don’t willing to spend energy to invest, is likely to give up some of the net present value greater than zero investment projects, which will produce a lack of investment phenomenon; Again such as executives to by expanding control of the enterprise resources to seek personal gain for themselves, may invest in some of the items the net present value less than zero, which leads to excessive investment, divestment and under investment belong to the efficiency of investment, will infringe on equity rights and interests.Therefore, in order to effectively solve the problem of principal-agent and asymmetric information, enterprise can make effective compensation policy, will be closely linked to the interests of shareholders and executives, so that executives have enough motivation and reason to keep consistent with shareholder goals, work hard to improve the efficiency of corporate investment. External audit at the same time as the key part of corporate governance measures, can play a supervision and guarantee mechanism, in order to improve enterprise’s financial information quality, alleviate the degree of information asymmetry, so as to reduce the risk of moral hazard and adverse selection and restricting the management of opportunism motivation, inhibit the efficiency of investment behavior. In conclusion, executive pay as a kind of internal incentive mechanism in corporate governance, external audit quality as an external supervision mechanism in corporate governance, they can to a certain extent, affect the efficiency of investment behavior.This article selects the Shanghai and Shenzhen a-share manufacturing listed companies from 2011 to 2014 as the research object, based on the revised Richardson measurement model to measure the efficiency of investment. Through empirical test proved that executive pay and external audit quality is the efficiency of the enterprise investment has a negative effect, which improve the efficiency of executive compensation helps to restrain the investment, improving the quality of external audit helps to inhibit the efficiency of investment; Are found on the basis of executive compensation for the negative effect of the investment efficiency can be due to the difference of the external audit quality and presents different sensitivity, namely external audit quality is higher, the executive pay is the negative effect on the efficiency of investment is smaller; In addition, this article also the nature of property rights as executive pay and external audit quality is the efficiency of the enterprise produces the influence factors of negative effect, found that compared with the state-owned enterprises, the non-state-owned enterprises, the executive compensation and the external audit quality of the efficiency of the enterprise investment are more significant negative effects, and high quality of external audit can weaken executive pay and the more negative relationship between the investment efficiency. According to the research conclusion, this paper puts forward the compensation system, the establishment of executive competition oriented marketization compensation incentive mechanism, establishing the audit error of civil compensation mechanism, improve the audit fee disclosure policy, strengthen the supervision of audit market face the government agencies, such as measures to restrain the efficiency of investment.