The Research On State-owned Enterprise Executive Ownership,Internal Control And Overinvestment

Since the 19th National Congress of the Communist Party of China,state-owned enterprises have improved their equity incentive policies and internal control systems,and formed a compatible mechanism of incentives and constraints to help improve the investment efficiency of state-owned enterprises:Incentive executives with equity to meet their material needs and weaken their profit motive of investment decision in the state-owned enterprises;Stop executives from improper investment behavior through internal control.State-owned enterprises pay equal attention to incentives and constraints.Executive shareholding and internal control have an inhibitory effect on over-investment,but the specific interaction effect is still unknown.Exploring the relationship among executive shareholding,internal control and over-investment in state-owned enterprise,which will help improve incentive compatibility mechanism and provide policy suggestions for promoting the reform of state-owned enterprises.Taking the data of Shanghai and Shenzhen A shares from 2011 to 2020 as a sample,combined with principal-agent,information asymmetry and other theories,this paper proposes 4 hypotheses,establishes 4 models to empirically tests the relationship among state-owned enterprise executives’ shareholding,internal control and overinvestment.First,this paper establishes linear model and nonlinear model to test the benefit convergence effect and management defense effect of state-owned enterprise executive stockholding on overinvestment respectively.Second,the interactive variable is introduced to tset the inhibitory effect of state-owned enterprise internal control on overinvestment.Finally,a interactive effect model is established to test the the interaction between executive ownership and internal control on overinvestment in state-owned enterprises.The research conclusions show that:the proportion of state-owned enterprise executives’shareholding and the quality of internal control are significantly negatively correlated with overinvestment,and the interaction between the two on overinvestment is manifested as a significant substitution effect.The higher quality of the internal control in state-owned enterprises,the benefit convergence effect of overinvestment is smaller,indicating that the internal control construction of state-owned enterprises has weakened the internal supervision function while focusing on the information and communication functions.Division of labor between executives’ shareholding and internal control occurred in their inhibition of overinvestment,and central state-owned enterprise executives’ shareholding has a more significant inhibitory effect on overinvestment than local state-owned enterprises.The following policy recommendations are put forward based on the empirical research conclusions:the government and state-owned enterprises should work together to deal with the problem of overinvestment,should carefully relax the conditions for senior executives’shareholding,increase the shareholding ratio of state-owned enterprise executives;strive to improve the internal control system of state-owned enterprises,strengthen the construction of internal control functions;innovate the promotion mechanism of state-owned enterprise executives,and optimize the promotion mechanism design;establish a policy-led interaction mechanism between the government and state-owned enterprises,improve the incentive and restraint system to reduce the overinvestment level of state-owned enterprises,and improve investment efficiency to drive the development of state-owned enterprises.