What is the impact of executive incentives on investment efficiency in mixed ownership enterprises?

China has been exploring the economic system suitable for the development of Chinese enterprises in combination with its own characteristics, and how to make enterprises develop better and how to enhance the value of enterprises has always been the focus of attention in the academic circles.

The report of the 19th National Congress of the Communist Party of China also clearly pointed out that "deepen the reform of state-owned enterprises, develop a mixed-ownership economy, and cultivate world-class enterprises with global competitiveness".The Blue Book of Corporate Social Responsibility 2019 also shows that mixed ownership is progressing steadily.

The development of mixed ownership, so that the state-owned economy and other types of economy complement each other's strengths, state-owned enterprises to introduce private shares, foreign shares and other ways to increase non-state-owned sharesIt has both state-owned capital and other types of ownership capital, and different types of ownership capital complement each other and develop together, so as to further improve the modern enterprise system and market competition mechanism, forcing state-owned enterprises to improve the efficiency of asset use to improve market competitiveness.

Whether an enterprise can make effective investment plays a vital role in its long-term development, determines the viability of the enterprise, and is also one of the important ways to measure the value of the enterprise. Generally speaking, it is only effective to invest assets in projects where the net present value is greater than zero, and if the investment is less than zero net present value is not conducive to the long-term development of the enterprise, such investments should be avoided as much as possible.

However, due to the existence of the problem of entrustment and information asymmetry, there is a general problem of inefficiency in the market. How to better play the role of executive incentive throughout the whole process of China's economic reform, the executive incentive system plays a vital role in improving the modern enterprise system.

The purpose of executive incentive is to establish a contractual relationship between executives and the enterprise, to motivate and restrain executive behavior, to motivate executives to be consistent with corporate goals in order to get more compensation, and to restrain and inhibit the self-interested behavior of executives in the operation and management of enterprises.

*The "Operational Guidelines for the Reform of Mixed Ownership of Enterprises" points out that mixed-ownership enterprises should be encouraged to adopt a variety of incentive methodsFor example, the medium and long-term incentive policies can be comprehensively used through employee stock ownership, equity incentives, dividend incentives, etc., focusing on the positive role of non-material incentives, and systematically improving the comprehensive effect of positive incentives.

Due to the problem of entrustment and information asymmetry, the establishment of a reasonable and effective executive incentive plan is of great significance to the development of the enterprise. First, investment is an important decision in the daily operation and management of enterprises, and if the investment efficiency is low, it will not only drag down the development process of the enterprise, but also affect the effective utilization of social resources.

Over the years, a large number of scholars in China have carried out multi-faceted exploration and research on the issue of investment efficiency, and have obtained rich research results. These research results mainly examine how to improve the investment efficiency of enterprises from the perspective of corporate internal governance, and some study the impact on investment efficiency from the perspective of financial policy.

Second, the incentive mechanism has a long history of being used abroad as an important means to motivate and restrain the behavior of executives, but it is still imperfect in China. In China's special economic system and policy environment, there are listed companies with different sizes, the modern enterprise system is not perfect, and monetary remuneration is not fully integrated with the market.

The implementation of equity incentives is also different due to the different conditions and systems of listed companies, and even if there are these problems, the incentive mechanism still plays an important role in the development of enterprisesTherefore, in order to enrich and improve the executive incentive mechanism in China, the impact of executive incentive on investment efficiency is studied.

Since the concept of mixed ownership was first proposed, the development of mixed ownership has been the focus of national attention, and the report of the 19th National Congress of the Communist Party of China clearly stated that "deepen the reform of state-owned enterprises, develop the mixed ownership economy, and cultivate world-class enterprises with global competitiveness".

It is a common phenomenon to deepen the reform of enterprises and develop a mixed-ownership economy to make enterprises more dynamic and vigorous, while the investment efficiency of state-owned enterprises is not highFrom this perspective, the significance of the development of mixed ownership is enriched from the perspective of the investment efficiency of state-owned enterprises that have carried out mixed ownership reform and how the degree of mixed ownership will have on the investment efficiency of enterprises.

An important reason for the low investment efficiency of most enterprises is that most of today's enterprises implement the separation of two positions, that is, the owner and manager of the enterprise are not the same person, so that the goal of the principal and the first person is not always the same, if the enterprise has a reasonable executive incentive system, promote the principal and the first person to maintain the consistency of economic interests, so as to effectively alleviate the cost and improve the investment efficiency of the enterprise.

The research literature of domestic scholars mainly focuses on the relationship between mixed ownership, investment efficiency and enterprise performance. With the decline in the efficiency of China's macroeconomic investment since the 90s, this situation shows the external urgency of China's economic structure that needs to be adjusted. After years of experience and practice, it has been proved that the development of mixed ownership is a correct way, so the problem of declining investment efficiency should be solved through the innovation of institutional systems.

From the two aspects of the control of retained state-owned shares and the political connection of senior executives, it is found that the impact of a single factor on the inefficient investment of enterprises can be effectively alleviated after the mixed ownership reform. The impact of equity mixing in different ways on investment efficiency is different, and under the condition of state-owned holding, the introduction of other types of shares can have an inhibiting effect on the excessive investment of enterprises.

Optimizing the shareholding structure can improve the investment efficiency of enterprises, especially the proportion of state-owned shares. Mixed-ownership reform is a feasible way to solve the problem of inefficient investment in state-owned enterprises, because it can alleviate the problem of soft budget constraints on investment, thereby enhancing investment capacity.

Second, because the development of the mixed-ownership economy will optimize the industrial structure, promote market fairness, and produce higher requirements for the investment capacity of state-owned enterprises, thus forcing them to reform their investment mechanism. By looking at individual executives' data over a long period of time, we found a strong positive correlation between executive compensation and firm performance when measured by shareholder returns and firm sales growth.

If you want to maximize the value of your company's assets, it is impossible to use a single ownership structure. Therefore, the maximization of the value of enterprise assets actually requires a diversified ownership structure, and management shareholding and management income based on ** have an important positive impact on enterprise value.

There is a significant positive correlation between the degree of ownership mixing and investment efficiency, and the more fully mixed the degree of enterprises, the more conducive to the investment efficiency of enterprises. At present, China is constantly deepening the development of mixed-ownership enterprises, and should continue to allow more state-owned economy and other ownership economies to develop into mixed-ownership economies, so that enterprises can participate in competition in a more market-oriented way.

Improve the efficiency of enterprise investment. There is a significant positive correlation between executive incentives and investment efficiency, that is, both monetary compensation incentives and equity incentives can promote the investment efficiency of enterprises. It shows that an appropriate increase in executive compensation can help improve the enthusiasm of senior executives, alleviate costs, align the interests of management and shareholders, and make investment decisions more efficient.

As the most traditional means of motivating executives, monetary compensation still plays a positive role in governance. At the same time, equity incentives can also promote the investment efficiency of enterprises, so we can further strengthen the role of equity incentives. The degree of ownership mix has a significant positive moderating effect on the positive correlation between monetary remuneration incentive and investment efficiency.

It shows that the more fully the mixed-ownership reform of mixed-ownership enterprises, the better the effect of monetary remuneration incentives on investment efficiency, and the degree of mixed-ownership reform is conducive to the optimization of equity structure, reducing the cost of mixed ownership, and then improving the investment efficiency of executivesThe degree of ownership mix has a negative moderating effect on the positive correlation between equity incentive and investment efficiency, but it is not significant.

Mixed-ownership enterprises are divided into high-scale and low-scale groups, and the positive moderating effect of the high-scale and low-scale groups on the positive correlation between the degree of mixed ownership and investment efficiency, the positive correlation between executive incentives and investment efficiency, and the positive correlation between monetary remuneration incentives and investment efficiency in the high and low scale groups are established.

There is a positive correlation between equity incentive and investment efficiency in the high-scale group, but it is not significant. The mixed degree of ownership of the low-scale group has a positive moderating effect on the positive correlation between equity incentive and investment efficiency, but it is not significant.

Mixed-ownership enterprises are divided into commercial competition and specific functional categories, and the mixed-ownership degree of mixed-ownership enterprises is positively correlated with investment efficiency, executive incentives are positively correlated with investment efficiency, the degree of ownership mixing has a positive moderating effect on the positive correlation between monetary remuneration incentives and investment efficiency, and the positive correlation between equity incentives and investment efficiency is positive but not significant.

Firstly, it is verified that the degree of ownership mixing of mixed-ownership enterprises promotes investment efficiency, which shows that the complementary advantages formed by the combination of different types of equity in mixed-ownership enterprises are helpful to improve the investment efficiency of enterprises. The allocation of resources in the market affects the development of the entire market, and the development of mixed ownership.

From the perspective of state-owned enterprises, the introduction of non-state-owned capital can not only increase the capital of enterprises, but also bring relevant management experience to further improve the governance structure of state-owned enterprises and enhance their market competitiveness. Among the existing mixed-ownership enterprises, there may be some enterprises with a low degree of mixed ownership and low investment efficiency.

But on the whole, the degree of ownership mixing plays an important role in investment efficiency, through different types of equity mixingAvoid situations where one party's voice is too high or too low, not only combine the advantages of state-owned enterprises and non-state-owned enterprises, but also increase the supervision of controlling shareholders.

Therefore, in the process of mixed-ownership reform, the development of equity diversification should be promoted, especially the mixed-ownership enterprises belonging to commercial competition should encourage equity diversification, while the mixed-ownership enterprises with specific functions need to be more cautious in the development of equity diversification, so as to implement policies according to the category, and promote the mixed-ownership reform to be more successful and effective.

The empirical results show that both monetary compensation incentives and equity incentives for executives can promote the investment efficiency of enterprises, all in the process of mixed ownership reformEnterprises can build a diversified executive incentive mechanism to meet the diversified incentive needs of enterprises through the combination of material incentives and non-material incentives, short-term incentives and medium- and long-term incentives.

For example, in the monetary remuneration incentive system for senior executives, the remuneration returns obtained by senior executives can be linked to the operating performance of the enterprise, and the performance appraisal mechanism of senior executives can be improved, and the work enthusiasm of senior executives can be mobilized through scientific and reasonable evaluation methods and objective and fair reward and punishment mechanisms, so as to improve the investment efficiency of enterprises.

At the same time, we will give full play to the supervision mechanism and supervise the incentives of senior executives through the supervision of the board of directors and the board of supervisors, shareholder supervision and audit supervisionEnsure the fairness and impartiality of the entire incentive process, and publicize the results and accept the supervision of other employees.

Monetary compensation incentives for executives are short-term incentives, and corporate executives may also compromise long-term interests for short-term goals when their tenure is approaching, so they also need to be combined with long-term incentives to better play a binding role. If equity incentives are implemented, the implementation history of equity incentives in China is relatively short compared with foreign countries.

The equity incentive system in the whole market is not perfect, and there are many requirements for the implementation of equity incentives, and the number of enterprises that can adopt equity incentives is also smallMany enterprises have zero shareholding by executives, and even if equity incentives are implemented, there are various problems such as unreasonable incentive plans, which affect the development of executive equity incentives.

However, many scholars have empirically shown that the implementation of equity incentives can help improve corporate performance and investment efficiency. With the continuous improvement of the incentive system, enterprises also pay more attention to the effective combination of short-term incentives and medium- and long-term incentives, and the management of executive equity incentives is also more strictly standardized.

Therefore, it is necessary to construct a diversified executive incentive mechanism and comprehensively use short-, medium- and long-term incentive mechanisms to systematically improve the positive incentive effect. The information asymmetry between executives and shareholders makes executives have a much greater grasp of information inside and outside the market and investment project information than shareholders, and executives in the information advantage may make investment decisions that are unfavorable to the enterprise for personal interests, resulting in a decline in investment efficiency.

At present, there are various problems such as incomplete, inaccurate and even false information disclosure of listed companies in China, and the degree of information disclosure is low. If the higher the degree of information disclosure of the listed company, the more shareholders understand the corporate governance structure and operating conditions, the more conducive it is to formulate a reasonable and effective supervision and incentive plan, so that the senior executives can carefully weigh the investment decisions.

Choose investment projects that are conducive to the development of enterprises, so as to improve investment efficiency. Therefore, it is necessary to strengthen the degree of information disclosure of listed companies, increase supervision and punishment for information disclosure, and increase the degree of information disclosure of enterprise investment decisions, so that shareholders' grasp of information tends to be consistent with that of senior executives.

In order to strengthen the supervision of executives, reduce the self-interested behavior of executives from the source, and provide a more transparent environment for enterprises to implement executive incentives, so as to improve the efficiency of enterprise investment.