State-owned Enterprise Executives’ Political Promotion Incentives And Internal Control Effectiveness

Internal control has always been an important research topic in the practical field.It can be seen from the events of state-owned assets loss and state-owned enterprise executive fraud that it is not enterprises do not have an internal control system,but whether the internal control actually plays a role in the implementation process is subject to the influence of the soft factor of “person”.In the context of wage limits and vigorous anti-corruption,the explicit salary and hidden on-the-job consumption of state-owned enterprise executives have been continuously regulated in recent years.In addition,there are still many imperfections in equity incentives,and in fact,they have not yet exerted long-term incentives.These make promotion incentives an important incentive for executives.State-owned enterprise executives are not typical “managers”,and their promotion can not only bring about material returns,but also attach benefits related to non-material incentives such as power,reputation,and political status,and the political promotion incentives of executives greatly influence their various management behaviors.Since internal control is an important way and guarantee for the compliance of various financial activities of enterprises,it is natural for executives to bring the target requirements for promotion into the process of internal control construction and execution.What is the relationship between the two is worth studying.Based on the view of implicit incentive,this paper empirically tests the relationship between executives political promotion incentives and the effectiveness of internal control and provides empirical evidence with the sample of the state-owned companies from 2008 to 2016.This paper shows that the stronger the political promotion incentives of executives in state-owned enterprises,the better the effectiveness of internal control.Whether before or after the 18 th CPC National Congress,the political promotion incentives is positively correlated with the effectiveness of internal control,thus supporting the viewpoint of the performance theories.At the same time,compared with central enterprises,the political promotion incentives of the local state-owned enterprises has more significant impact on the effectiveness of internal control;compared with the industry in the recession,the political promotion incentives of state-owned enterprise executives has more significant impact on the effectiveness of internal control in the industrial boom.This paper explains the relationship between executive incentives and the effectiveness of internal control from the perspective of political promotion incentives,and provides empirical evidence for further research onexecutive incentives and corporate performance and governance.