Executive Equity Incentive And Firm Value

This dissertation is to study the determinants of executive equity incentive and the link between executive equity incentive and value in endogeneity about the Chinese listed firms. According to the requirement of study in endogeneity, we select high technology firms as the sample, use balanced panel data between2001 and 2004, adopt GLS, Fixed Model, 2SGLS and Hausman Test to control the endogeneity of executive equity incentive resulted from the affection of exogenous factors and endogenous factor in the firm's contracting environment. The dissertation has found some evidences different from previous research. Exogenous factors include the firm's financial characteristics, ownership structure and management characteristics; endogenous factor is only board composition.1. The exogenous factors affection to executive equity incentive and firm valueThe evidences suggests that the proportion of managerial ownership is related positive to the firms growth of total asset, and negative to the firm size, free cash flow, the structure of asset, and positive to the centralization of equity. The proportion of managerial ownership is related positive to the proportion of the largest shareholder when the largest shareholder is state-owned holder. The proportion of managerial ownership would decrease when the chairman is also CEO, or the CEO is also director. And there is a positive relation between the proportion of managerial ownership and the age of chairman and CEO. We also find Tobin'Q initially increases with the proportion of managerial ownership, then decreases-an adverse U shape relation between the proportion of managerial ownership and firm value under the affection of exogenous factors.2. The joint-determined relationship of executive equity incentive, endogenous factor(board composition) and firm valueFirst, executive equity incentive and board composition are determined jointly. The proportion of managerial ownership and independent directors are negatively affected each other. The proportion of managerial ownership and non-executive directors are positively affected each other. Second, board composition and corporate value are determined jointly. The proportion of independent directors and corporate value are negatively affected each other. The proportion of non-executive directors and corporate value are positive affected each other, but the relation between non-executive directors and corporate value is not significant. The evidence suggests there is not stable and significant relation between board composition and corporate value. Third, the dissertation has found Tobin'Q also initially increases with the proportion of managerial ownership, then decreases-an inverse U shape relation between the proportion of managerial ownership and corporate value under the affection of endogenous factor(board composition). The evidence suggests that there is stable and significant relation between executive equity incentive and corporate value.