Research On Executive Incentive And Capital Structure Decision

The research on capital structure decision-making has always been a hot topic in academic circles.The academic generally believe that there exist an optimal capital structure in which firms have the lowest capital cost and maximize the value of the firm.However,based on the changes of external environment and internal factors of the company,the enterprises' actual capital structure is in a process of dynamic adjustment,the optimization of target capital structure and pursuit the maximization of enterprise value.Among the internal characteristics that affect capital structure decision-making,the influence of the company management decision of the parties involved in the psychology and behavior of the decision has highly drawn the attention to the scholars,For the listed companies,due to the differences for the preferences of executives in the financing process,each of the listed company's capital structure will be different in a certain period of time,and executives as the final-decision-maker of the company's capital structure decision,the executives'motivation and ability to pursuit the optimal capital structure?adjust to the capital structure decided the degree of adjustment of capital structure.Therefore,the research about capital structure decision need to focus on how to motivate executives to make their decision based on the maximization of corporate value.In this paper,we base on the establishment of Motivate Mechanism as a starting point to explore the impact of executive compensation incentive on the company's capital structure decisions,according to the analysis of Principal-agent Theory,Effective Contract Theory,Managerial Power Theory,Risk Aversion Arguments,Optimal Capital Structure Theory,Prospect Theory,We use the A-share listed companies in China from 2005 to 2015 as the research sample,using the fixed effect model to test the correlation between executive compensation incentive and capital structure decision-making.The study found:(1)the implementation of executive compensation incentive can significantly optimize the decision-making of enterprise capital structure,that is,the higher the incentive compensation intensity of the company,the faster the company's capital structure adjustment.(2)The effect of executive compensation incentive on capital structure adjustment speed is asymmetric.When the capital structure is adjusted upward,the salary incentive on the adjustment speed of capital structure dynamic effect will be greater.(3)In the enterprises with different property rights,the effect of executive compensation incentive on capital structure decision-making is different.Compared with the state-owned business,the promotion effect of salary incentive on capital structure adjustment is more significant than its in non-state-owned enterprises.According to the research results,this paper puts forward to correctly understand the impact of salary incentive on executive behavior,while constantly improving the incentive mechanism of executive compensation,and give full consideration on the problem of capital structure optimization.For state-owned enterprises,it is necessary to deepen the reform of state-Owned enterprises in all aspects of market-oriented reform,pay attention to the utility value of executive behavior in corporate investment and financal decision-making.