| The impact of executive equity incentives on the firms’resource allocation behavior is one of the most important study in the field of corporate governance, and also is always taken seriously by the theoretical worker as well as listed companies and their regulators. Different from mature equity incentives system and its institutional environment in western developed capital market, China’s capital market began to enter into a new age of true meaningful equity incentives, only since the "Administrative Measures for Equity Incentives of Listed Companies (Trial)" promulgated by China Securities Regulatory Commission in2005.Whether its maturity or institutional environment, China’s equity incentives system has a big gap compared with the western countries. Then, what economic consequences of equity incentives system which have just emerged in China’s capital market on corporate resource allocation behavior can be caused? More specifically, whether and how equity incentives affects firms’ investment behavior? As important sources of investment, what role debt financing can play in it? Isn’t the effect difference for equity ownership incentives (H-S incentives) and stock options or restricted stock (O-R incentives)? Deeply rooted in China’s especial institutional background which is characterized as "newly emerging+transformational", the theoretically and empirically answer to these questions has extremely important theoretical and practical significance for equity incentives system which is currently prevailing in the China’s capital market.Under China’s especial institutional background, this dissertation studies the inherent impact relationships among equity incentives, debt financing and investment behavior, combined using the theoretical and empirical methods. The main thread of this dissertation is as follows:Firstly, because equity incentives may increase the executives’ risk-taking incentives and impulse of empire-building, cause catering investment in market and loose financing constraints, executives have motivation to increase capital investment and research and development (R&D) investment, and thus will affect investment efficiency; Secondly, focuing on one of these influence ways-financing constraints loose, that is debt financing, this dissertation studies the effect of equity incentives on firms’debt financing before debts contracted, using the signaling theory and risk-taking theory of equity incentives; Finally, this dissertation mainly investigates two opposite action mechanisms of debt in the impact of equity incentives on firms’investment behavior after debts contracted, that is the contingent governance and asset substitution of debt.This dissertation consists of eight chapters:Chapter1is introduction; Chapter2reviews relational literature; Chapter3pectinates main theoretic views on equity incentives, and its development course and the status at home and abroad; Chapter4bases on a theoretic framework, deductively reasons the affecting relationships among executive equity incentives, debt financing and investment behavior, and develops research hypothesis; Chapter5, Chapter6and Chapter7empirically test these hypothesis, respectively, and analyse results; Chapter8shows research results, builds the theory model of executive equity incentive systems and its regulation in listed Chinese companies and puts forward policy suggestions, finally, the limitation and further research direction are indicated.This dissertation’s main results are as follows:(1) The implementation of CEO equity incentives significantly induce firms to increase R&D investment, especially capital investment, and the higher the equity incentive intensity, the larger R&D and capital investment level; However, this investment decision deviates from the optimal investment level, and manifests as high level but low efficiency investment behavior, that is, executive equity incentives doesn’t inhibit under-investment, instead, significantly lead to over-investment; Furtherly, research demonstrates these relationships main focus on these firms with O-R incentives, the implementation of H-S incentives have helped increase firms’R&D investment but have no significant impact on capital investment and investment efficiency.(2) In general terms, the higher CEO equity incentives intensity, the more interest-bearing debt financing can firms obtain, but mainly embodies the increase of short-term borrowing, the long-term borrowing doesn’t rise; From the specific incentive models, compared with these firms with H-S incentive model, the implementation of O-R incentive model enables these firms to get more interest-bearing debt financing, especially short-term borrowing, but nevertheless, the positive impact of CEO equity incentive intensity on short-term borrowing was concentrated in the H-S incentive intensity, O-R incentive intensity has no significantly influence on debt financing.(3) Because the increase in debt financing, especially short-term borrowing, eases firms’ financial restraint and gives executives have more free cash, short-term borrowing significantly exacerbates the positive impact of equity incentives on firms’ capital investment, and thus exacerbates firms’over-investment problem; And these influence main focus on these firms with O-R incentive model rather than that with H-S incentive model, but the interaction between O-R incentive intensity and debt financing do not significantly affect firms’ capital investment and over-investment level.Above all, this dissertation’s theoretical analysis and empirical investigation documents that, China’s current equity incentive system has a significantly economic consequences on firms’ investment and financing behavior. This paper attempte to do several exploratory researches on the problem of equity incentives, debt financing and investment behavior, which hope to expand current literature in the following aspect:First, building on firms’ investment efficiency, this dissertation constructs a theoretical framework of executive equity incentives, debt and investment efficiency by puting debt financing and executive equity incentives into the theoretical analysis of enterprises’ value creation, which helps make up for research paradigm of separately examining executive incentives effects and debt governance effects.Second, this dissertation pays attention to the background of China’s special institutional environments, analyses and verifies the impact of executive equity incentives on firms’ investment and then investment efficiency, which provide direct empirical evidence on economic consequences of implementing executive equity incentive system in China’s capital market, which is characterized as "newly emerging+transformational", and further expand a small number of existing literature that investigates the impact of stock options on R&D investment at home and abroad; Meanwhile, this paper further expands these empirical literature on examining the effect of equity incentives on borrowers’ loan decision-making before debt contracted by investigating how has debt impact the relationship between equity incentives and investment after debt contracted.Third, by introducing investment as a bridge, this dissertation breaks in current literature on studying the direct impact of executive equity incentives on enterprise value, which provide an important perspective to equity incentives effects; Meanwhile, this paper attempts to jump out of previous research framework in which most studies investigate the impact of executive equity incentive on enterprise value-added from stockholder, through surveying equity incentive system as easing the agency conflict between stockholder and executives from the perspectives of creditor, which provide an unique perspective for research on equity incentives.
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