Research on the influence of equity incentive and internal control quality on company investment decision under the 14th five-year plan

Kuang-Cheng Chai, Xin-Rui Ma, Yu-Jiao Lu, Jing-Chen Wang, Yen-Chun Lai and Ke-Chiun Chang

Applied Economics, 2024, vol. 56, issue 50, 6080-6090

Abstract: With the increasing intensification of market competition, companies need to implement innovative strategies to gain market advantages. As an effective measure for companies to reduce agency costs between management and shareholders and alleviate the conflict of interest between the two, equity incentive can directly affect the behaviour of company executives. Investment decision is the foundation of a company’s healthy growth and cash flow growth in the future. This paper selects the panel data of Chinese listed companies from 2011 to 2021 as a sample, uses the quality of internal control as an intermediary variable in the process of measuring the implementation of equity incentives, and empirically studies the relationship between equity incentives and corporate investment decisions. The results show that there is a positive correlation between equity incentives and investment decisions, and the quality of internal control plays an intermediary role between the two. Equity incentive can optimize the internal control, improve the quality of internal control, so as to effectively promote the investment decision of companies. The implementation of equity incentives gives companies a competitive advantage while also adding momentum to economic development, thereby enhancing national competitiveness.

Date: 2024
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DOI: 10.1080/00036846.2023.2267818

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