Case Analysis On The Restricted Stock Incentives Of Dongjiang Environment

The principal-agent problem caused by the separation of enterprise ownership and management rights affects the governance level and long-term development of the enterprise.The emergence and application of equity incentives make the operators of enterprise have the "owner" status,which make executives operate and manage the enterprise from the perspective of the owners.At the same time,top managers will combine their own interests with the interests of the company,thus it could effectively avoid the short-sighted behavior of the operators.In addition,in the competitive market,talent is a scarce resource in the era of knowledge economy,how to attract talents,retain talents,and use talents is crucial to the long-term development of enterprises.As a long-term incentive and restraint mechanism,equity incentives have great appeal to talents.Many companies have already implemented or are preparing to implement equity incentives.Compared to developed western countries,China’s equity incentives started lately.It emerged in 1990 s,but it has been developing at an amazing speed from1990 s.In 2006,the China Securities Regulatory Commission officially announced the "Measures for the Administration of Equity Incentives of Listed Companies(Trial)",which means China’s equity incentives can be standardized.Moreover,in May 2016,the official implementation of the "Measures for the Administration of Equity Incentives of Listed Companies" opened the gulf of policy for those enterprises which preparing to implement stock incentives.There are many modes of equity incentives.Currently,restricted stocks have surpassed stock options to become the most popular incentive mode for listed companies in China.Whether the equity incentive plan can be successfully implemented and achieve the desired effect is determined by many factors,such as how the company choose its own equity incentive mode and how to determine the basic elements of the incentive scheme,which are the important contents for the successful implementation of incentive plans.The motivations and effects of the stock incentive plan varied from one enterprise to another depending on the specific situation of companies.In this thesis,the restricted stock incentives of Dongjiang Environment are used to analyze these issues,and some experiences can be learned by other companies.This paper adopts the way of the combination of theoretical and case study,and takes Dongjiang environment’s restricted stock incentive as the research object,analyzing the contents of the scheme design before implementation,implementation process and implementation effect of the incentive plans.In accordance with the research idea of "propose a problem,analyze the problem,solve the problem",this thesis focuses on the following 4 questions:(1)What are motivations for Dongjiang Environment to implement equity incentives?(2)What is the effect of Dongjiang Environment’s implementation of equity incentives?(3)What are the reasons for Dongjiang Environment’s successful implementation of equity incentives and whether it is closely related to the selection of the various elements of incentive schemes?(4)What is the experience of the successful implementation of this equity incentive that could be learned by other companies? At the same time,are there some problems that need to be paid more attention to?According to the above research ideas and methods,the structure of this thesis is as follows: Firstly,the research background and significance of equity incentives are expounded,and the theoretical and empirical research on the motives and effects of equity incentives and the basic elements of incentive schemes are reviewed.In the process of review,we could find that most scholars believe that the implementation of equity incentives has a positive impact on corporate performance,and the difference of impact has close correlation with the elements design of equity incentive schemes.For this reason,in order to implement stock incentives successfully,it is very important for enterprises to design a scientific and rational incentive scheme.Secondly,this thesis introduces the related concepts of equity incentives and restricted stocks,and the basic factors such as the stock source,the amount and object of grant,the price of grant and the conditions for unlocking restricted stocks are explained respectively.The theories of principal agent,human capital and two factors are also introduced in this part,which provided the theoretical basis for the subsequent analysis.Then,there is a specific introduction of two restricted stock incentive schemes of Dongjiang Environment,the implementation process and motivations in this part.Besides,this thesis analyses the implementation effect from the aspects of financial performance and short-term market reaction.Stabilizing talent team,promoting the abilities of scientific research and innovation,optimizing the governance structure are also the important contents of analysis.All the analytical results show that the equity incentives has a positive influence on Dongjiang Environment.Specifically,this thesis analyzes the financial performance of Dongjiang Environment through the financial indicators of abilities includingprofitability,debt repayment,operation and development.In the study of the short-term market reaction of Dongjiang Environment’s implementation of two equity incentives,the event research method was adopted and the relevant market model was constructed.Finally,from the basic elements of stock incentive schemes such as mode selection and stock source,granting object and amount,granting price and unlocking conditions,the reasons why the incentive plans can be successfully implemented are analyzed,and we could get some successful experience from the analysis.At the same time,this thesis comes up with some problems concerning evaluation criteria,internal control and supervision that the company should pay more attention to.