Executive Compensation Incentives,Analyst Tracking And Debt Financing Costs

After more than 40 years of reform and opening up,China has become the second largest economy in the world.State owned enterprises and non-state-owned enterprises have made significant contributions to the national economy.In order to further promote economic development,Premier Li Keqiang proposed in the 2018 government work report that: vigorously promote the reform of state-owned enterprises,support the development of private enterprises and emphasize the simplification of administration,tax reduction and fee reduction,optimize the business environment and improve the quality of economic development.If an enterprise wants long-term development,it cannot do without financing.If it faces high financing cost,it will damage its long-term development.In order to further stimulate the vitality of enterprises and fully release the potential of executives,executive incentive has become an important issue.Executive incentive can be divided into explicit incentive and implicit incentive.As equity incentive was implemented in 2006,the most important part of explicit incentive in China is still monetary compensation incentive.Based on the sample of listed companies from 2007 to 2018,this paper mainly studies the relationship between monetary compensation incentive and debt financing cost.Due to the difference of enterprise ownership,state-owned enterprises usually have more advantages than nonstate-owned enterprises in the credit market,so we also explore the difference of the impact of monetary compensation incentive on debt financing cost in different nature of enterprises.Considering the existence of external supervision mechanism,we also study the relationship between executive monetary compensation incentive and analysts’ tracking of debt financing cost.The results show that:(1)monetary compensation incentive can effectively reduce the cost of debt financing;(2)after distinguishing the nature of property rights,it is found that the governance effect of monetary compensation incentive in non-state-owned enterprises is significantly greater than that in state-owned enterprises;(3)as an important external governance mechanism,analyst tracking can also reduce the cost of debt financing,but it is an alternative when it plays a governance role at the same time with executive compensation incentive Mechanism rather than complementary mechanism.In the further study,we find that:(1)monetary compensation incentive can significantly improve the proportion of long-term loans obtained by enterprises;monetary compensation incentive can significantly increase the proportion of long-term loans in non-state-owned enterprises,and reduce the difference with the proportion of longterm loans of state-owned enterprises;the impact of analyst tracking and monetary compensation incentive on debt financing cost still presents alternative mechanism(2)The executive’s excess monetary compensation incentive can significantly reduce the cost of debt financing,and the executive’s excess compensation incentive can significantly reduce the cost of debt financing in non-state-owned enterprises compared with state-owned enterprises;the executive’s excess compensation incentive and the governance mechanism that analysts follow are mutually alternative;(3)after studying the executive’s in-service consumption incentive,we find that: the executive’s inservice consumption and debt financing cost are significant Positive correlation,that is to say,in-service consumption of senior executives will damage the governance effect of enterprises,and in-service consumption will damage the development of stateowned enterprises and non-state-owned enterprises.Although analyst tracking can inhibit this behavior,the external governance mechanism can not play a significant role in the case of internal governance failure.In this paper,based on the relevant research,the robustness test is carried out,and it is found that the conclusion of the hypothesis is still significant.The main contributions of this paper are as follows:(1)monetary compensation incentive is very important for senior managers,and enterprises need to provide monetary compensation incentive for senior managers.Reasonable monetary compensation incentive can significantly improve the corporate governance effect,so as to reduce the debt financing cost;(2)according to Adams’ equity theory,when senior managers think that their explicit incentive is insufficient,they feel unfair,and will take the way of implicit incentive That is,in-service consumption.In-service consumption will damage the development of enterprises.To further stimulate the vitality of enterprises,it is necessary to set up a reasonable salary incentive mechanism for executives,improve the excess salary and play the role of tournament incentive;(3)improve the construction and implementation of relevant laws and regulations,actively develop the external supervision mechanism of enterprises,combine internal governance with external supervision,and restrict enterprises through the construction of laws and regulations The possibility of bad behavior;(4)non-state-owned enterprises need to solve the problem of self generated credit discrimination,not only need to improve the transparency of information,increase the disclosure transparency of statement information,but also should strive to improve the level of internal governance,create a good compensation incentive contract,attract outstanding executives to manage.