Equity Incentive,Internal Control And Excessive Debt

In recent years,with the deepening of market economy system reform,the capital structure of enterprises has been constantly changing.The economic leverage risk and excessive debt of enterprises have attracted high attention from the government.The State Council has issued multiple policies that explicitly state the need to reduce the debt ratio of enterprises and accelerate economic transformation and upgrading through market-oriented and legal means.The direction of the released policies has also shifted from achieving the goal of "three reductions,one reduction,and one supplement" to balancing the dual tasks of "risk prevention" and "stable growth".This shift is also aimed at reducing the impact of excessive debt on the enterprise’s capital supply chain and risk defense capabilities in the new development stage.Given the complex types and diverse development situations of Chinese companies,how to scientifically and effectively guide enterprises in optimizing their capital structure will be a focus of economic policies for a long time in the future.Under the background of structural deleveraging policies,the equity incentive system,as a key part of modern corporate governance,has not yet fully achieved its desired governance effect,and even has encountered many problems.The management,as the most core organizational force in the daily operation process of the company,controls the decision-making power of the company’s operations and is also the implementer of various systems of the company.Incentives to management will inevitably have some impact on their behavior,which will also affect the effectiveness of internal control in the enterprise.Internal control is generally considered as a regulatory mechanism within a company.Under normal circumstances,it can promote the smooth progress of various aspects of work and improve the operational efficiency of the company.How to establish a sound incentive system and promote management to actively adjust and optimize the capital structure of enterprises is the key to current corporate governance.Therefore,the study of the relationship between equity incentives and excessive debt adjustment plays a crucial role.Based on this,this article draws on principal-agent theory,information asymmetry theory,incentive theory,and internal control theory to construct an analysis system that includes equity incentives,internal control,and excessive debt.It collects data from listed companies in China from 2013 to 2021,and focuses on examining the impact of equity incentives on excessive debt and the mediating role of internal control in the relationship between the two.It further analyzes the different property rights The difference in the effect of equity incentives on excessive debt in a competitive market environment.The conclusion of this article is as follows:(1)There is a negative correlation between equity incentives and excessive debt,implementing equity incentives can significantly reduce excessive debt;(2)Introducing internal control as an intermediary variable,we find that internal control plays a part of the mesomeric effect on the negative correlation between equity incentive and excessive debt;(3)Compared to state-owned enterprises and environments with high market competition,the impact of equity incentives,internal control,and excessive debt is more significant in non-state-owned enterprises and environments with low market competition.In summary,this article provides relevant policy recommendations for enterprises and governments to reasonably use equity incentives to alleviate excessive debt.Enterprises should design scientific and sustainable equity incentive plans that are in line with their own development,and focus on establishing a good internal control system.The government should continue to promote structural deleveraging and market-oriented enterprise reform,in order to optimize the capital structure of enterprises and ensure their healthy development.This article provides useful ideas for exploring equity incentives and structural deleveraging in state-owned and non-state-owned enterprises,and also has a certain reference value for completing supply side structural reform and deepening enterprise reform.