Market Process, Internal Control And Excess Perquisites

The promulgation of the "eight-point frugality code" has brought the upsurge of anti-corruption in China and demonstrated the country's anti-corruption determination.The Fourth Plenary Session of the 18 th CPC National Congress officially proposed "to form an effective mechanism of not daring to corrupt,not be able to corrupt and not wanting to corrupt".The report of the 19 th CPC National Congress reaffirmed "to strengthen the deterrence for not daring to corrupt,to reinforce the cage for not be able to corrupt and to raise the consciousness of not wanting to corrupt." China's institutional anti-corruption has taken shape.The ownership and management rights of modern enterprises are generally separated.Therefore the principal-agent relationship between the owners and the managers,who have the management rights of the enterprises,gives rise to excess perquisites,and the problem tends to spread.The managers may take advantages of their position and information to satisfy their own desires,for instance,to build luxury offices and seek extravagant consumption.Excess perquisites not only damages the value of enterprises,but also disrupts the market order,which has aroused widespread concern in the practical and theoretical circles.It is of great significance to explore the effective ways of curbing excess perquisites of executives of listed companies in the current context.The existing research mainly explores the impact mechanism on excess perquisites of executives from the perspective of company-level factors or from external perspectives such as government intervention and media supervision.With the advancement of various internal control norms and guidelines in China,internal control is taking root in companies and gradually evolved into internal governance mechanism.Can it effectively curb the excess perquisites of executives? After 40 years of reform and opening up,China's marketization process has gained world-renowned achievements.How will market forces,as the driving force of corporate governance,affect the excess perquisites of executives? Will the governance effect of internal control on excess perquisites be affected by the external governance environment of marketization process?This paper selects China's A-share listed companies from 2014 to 2017 as a research sample,then combines analysis of the principal-agent theory,information asymmetry theory,internal control theory and the empirical analysis methods of multiple regression to explore the mechanism of marketization process and internal control for curbing excess perquisites and to further analyze the coupling effect of marketization process and internal control on excessperquisites.The results of the study are as follows: firstly,the higher the internal control quality of listed companies,the lower the excessive perquisites level of senior executives.Secondly,compared to areas with low marketization degree,the excess perquisites level of listed company executives is relatively low in the areas with high marketization degree.Thirdly,compared with marketization process,listed companies' internal control has a stronger inhibitory effect on excess perquisites of corporate executives in areas with low marketization degree.The conclusions of this paper affirm that internal control,as the formal internal governance mechanism of a company,can effectively restrain the excess perquisites level of executives.This paper further provides strong theoretical support for the internal control that China is vigorously promoting.The main contribution of this paper is that in the context of China's fierce anti-corruption fight and the emphasis on institutional anti-corruption,it includes the marketization process and internal control into one framework to explore their effects on excess perquisites of executives,and broadens the channel for prevention and control of executives' excess perquisites behavior.