A Study Of The Incentive Effects Of Executive Stock Options In Chinese Companies

The issue of how to solve the problem of incentive mechanism of managers in state-owned public companies in China has drawn economists' attention for years. In both academic and enterprises circles many people have been eager to introduce executive stock options, which is widely used in U.S.A, into China, because they think it is one of the effective methods to incentive high-level managers . The author seeks to start from the efficiency of this incentive method, through theoretical and practical comparison analysis and induction to penetrate into the effects of stock options, in order to have a relatively thorough reflection on the practical condition of the system in China. The structure of the dissertation is as follows.Introduction: explaining the track of thinking in the choice of the topic, summing up the research methods and their originality and introducing the structure of the dissertation.The first chapter summarizes theories on the incentive effects of executive stock options, theoretical basis and measuring methods of the incentive effects of equity compensation, and use the experiences of the application of ESO in the U.S.A for reference.on the aspects of the evolution and effects of taxation law, auditing law and other relative theories and policies that have been pushing forward the development of executive stock options , and the main factors influencing it's prevalence.The second chapter mainly discusses the factors that affect the popularity of ESO and key systematic factors that affect the efficiency of equity compensation contracts. With analysis of Enron case, emphasizes the importance of systematic rules that ensure the efficiency of ESO.The third chapter investigates the differences between China and USA in both macroscopic and microscopic environments, on the aspects such as the ownership structures of public enterprises, corporation governance and stock market, which are supposed to be the key systematic guarantee that makes the stock options smoothly applied in the USA for more than half century. Market economy has only a short history of twenty years in China, meanwhile many rules and regulations have being in the process of perfection or even at the very beginning of formation. Only by comparison can we have a better understanding of the mechanical premature basis, and preview the feasibility of the application of stock options in China. Therefore the author searches for the systematic and environmental defects in corporate governance of state-owned companies, tax laws and regulations, auditing laws, executive labor market and stock market which closely relate to the effects of stock options.In the last chapter the author tries to picture the probable results of applying executive stock options in China through analyzing existing cases of some Chinese publics companies where equity incentive have been applied, with attempt to examine the conclusions in the previous chapters, and give some suggestion on the application of ESO in China.The basic conclusion of the dissertation is: by analyzing the environmentalfactors pushing forward the practicing of stock options and examining it's actual incentive effects to executives, making comparison between the systematical environment in the stock market of U.S.A and China, the author warns that applying stock options should consider carefully the market and regulation environment which support the prospective effects of executive stock options.The study starts from the preconditions of varies discussions, boldly questions the incentive efficiency of stock options in the U.S by analysis of theoretical and empirical research, and scientifically examines its practical conditions in China.The author uses the methods of qualitative analysis combined with theoretical and empirical analysis to examine the concerned issues. Referring to the worldwide research achievements in this field, on the aspects of the systematic conditions of stock options, the study starts from comparative analysis through inductive method examining the vario...