Economic Interpretation on the Evolution of Internal Supervision Mechanism

Abstract

This paper constructs a theoretical framework and deduces mechanism and path in external environment of enterprise, evolution of internal supervision mechanism and individual decision of executive. First of all, Agency Theory is used to explain the root cause of the internal supervision mechanism and inevitability of the supervision of the individual behavior of executives. Secondly, the paper explains the path and motivation of the evolution of internal supervision mechanism by Comparative Institutional Analysis. Finally, Transaction Cost Economics is used to analyze transmission function of internal supervision mechanism evolution between external environment of enterprise and individual behavior of executive, and clarify its mechanism.