| After the 2008 financial crisis,the leverage ratio of emerging economies represented by China continued to climb.With the accelerated growth of leverage ratio,enterprises invest in a large number of high-risk asset portfolios,which not only aggravates the agency problem between managers and creditors,but also brings great risks to corporate.Because of its unique risk prevention ability,inside debt can alleviate the agency conflict between the executive and the creditor and restrain the executive’s risk motivation.Therefore,in recent years,as a new incentive model,this tool has been widely applied in commercial banks,securities,trust,insurance and other financial industries.In addition,in real life,managers often have irrational characteristics of time-inconsistent preferences,which will affect the investment decisions and values of enterprises.In this context,this paper analyzes from the aspect of time-inconsistent preferences,and studies the influence of inside debt incentive on enterprise investment decision.Firstly,this paper reviews domestic and foreign scholars’ researches results related to inside debt and time-inconsistent preferences theory.Then,it expounds the investment,principal-agent theory and time preference inconsistency theory.On the basis of relevant theories,from shallow to deep,firstly,establish the pricing model of enterprise securities under the time-consistent preference.It should be noted that,in order to highlight the excellent characteristics of inside debt,this paper selects two kinds of compensation structure-equity incentive,equity incentive and debt incentive for comparison.The benchmark model is established to pave the way for the subsequent research of this paper.Then,based on hyperbolic discount function,this paper constructs the research framework of securities pricing under the time-inconsistent preferences of managers and different salary structures,and deduces the fair price of each security.Then,by using the real option method,we solve the investment option value under the time-inconsistent preferences respectively,and obtain the optimal and sub-optimal investment threshold.Finally,through the numerical simulation method,this paper analyzes how the time-inconsistent preferences affects the investment decision-making of enterprises and the role of inside debt in the decision-making mechanism.The innovation of this paper lies in introducing inside debt into the analysis framework of time-inconsistent preferences for the first time,using asset pricing and real option theory,establishing a real investment model,studying the decision-making mechanism of enterprise investment under the time-inconsistent preferences,and giving the influence of inside debt on enterprise investment.The numerical results show that time-inconsistent preferences delay investment and the introduction of inside debt alleviates the investment distortion caused by time-inconsistent preferences to a certain extent.In addition,numerical analysis shows that under the condition of timeinconsistent preferences,inside debt inhibits executives’ risk-taking motivation and reduces the level of enterprise risk taking.After considering the agency problem between managers and ordinary creditors,inside debt incentive reduces the agency cost between managers with time-inconsistent preferences and creditors,but this effect is asymmetric.Specifically,inside debt a greater impact on naive managers.These theoretical results have practical application value for China’s highly leveraged enterprises to use debt incentive to design executive compensation contract.According to the results of theoretical analysis,highly leveraged enterprises should pay attention to the influence of managers’ behaviors on corporate decisions in corporate governance practices,and improve the soundness of corporate operations by reforming the performance appraisal mechanism of executive compensation and improving the incentive system of inside debt. |
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