Research On The Efficiency Of Market-based Incentive And Restraint Mechanism In Corporate Governance

This thesis is composed of theoretical analysis and empirical research part except of the summary on the literature of corporate governance.The first aspect is the part of theoretical research. In this part of the thesis, the author scanned the American corporate governance model as one market-oriented model in corporate governance, described its kinds of characteristics such as dispersed ownership structure, advanced stock market and perfect legal protection, summarized corporate control market and executive stock option plan as two core incentive and restraint mechanisms in market-oriented corporate governance model, and then analyzed the basement both of these two kinds of mechanisms and of the market-oriented model in corporate governance—the pricing efficiency of stock market.Next, the author individually analyzed the principles, categories; prerequisites of the corporate control market and of executive stock option plan and pay much attention to their functions and efficiencies as well as limitations in corporate governance.After the theoretical analysis on main incentive and restraint mechanisms in American corporate governance model, the implication for improving Chinese corporate governance was provided as the following:The first, Chinese corporate control market should be sustained, and its function on corporate governance should be strengthened by reinforcing related legislations, especially the rules and supervising mechanism on leveraged buyout and tend offer bid.The second, the level of Chinese corporate governance also should be improved by established extensive inside incentive mechanism. Executive stock option plan was an efficient incentive mechanism that could play an important role in having executives to pay much attention to long term performance, but as the mean while it had too many prerequisites to take effect and some limitations and negative functions as well. Therefore, establishment and implementation of executive stock options plan in corporate governance is a hard task in long run to accomplish.The Third, the interaction between internal control mechanism and external control mechanism in corporate governance should be pay attention to. Both internal and external control mechanisms are complementary to each other, and their common purpose is to enable enterprises in the right track and maximize the value of shareholders.The other aspect is the empirical research on Chinese listed company. The thesis played the research theme on the market-based incentive and restraint mechanism, integrating the market for corporate control and the stock option plan to an overall mechanism. The empirical research analyzed the performance change after corporate control transfer and the implementation of stock option plan, explaining the probable reasons of the performance change. The paper also reveals the true state and trend of the market-based incentive and restraint mechanism efficiency of Chinese listed company.The thesis analyzed the performance change after corporate control transfer of Chinese listed company with factor analysis, one-way ANOVA test and significance test. The thesis got some conclusions from the empirical research of Chinese listed company whose control power had transferred in 2004. The first, in the equity division condition, the market for corporate control is full of administrative character and could not play its governance effect. The second, The full flow of corporate share increases the probability of merger and acquisition which stimulated the big shareholder and manager to work hard and strengthen corporate governance level. The third, the transfer of corporate control still plays a weak role in the performance promotion of listed company. The main reason lies in the reality that corporate interior governance has not play true effect in most Chinese listed company.The thesis analyzed the performance change after carrying out stock option plan in Chinese listed company with factor analysis, one-way ANOVA test and significance test. The paper got some conclusions from the empirical research of Chinese listed company which carried out stock option plan in 2006. The first, the profitability of listed company has a certain promotion after carrying out stock option plan. This result shows that the time is ripe for carrying out stock option plan in Chinese listed company. The second, the earnings ratio and earnings per share increases, but the profit margin of main business, turnover of total assets, receivables turnover, debt ratio, liquidity ratio, net assets value per share, contributed surplus per share, net cash flow of operating activities per share has not changed distinctly. This result shows that the competition ability of main business, debt paying ability and cash obtaining ability of sample listed company has not increased with the profitability.The thesis embodies its innovation in three parts: the first innovation is systematic theoretical analysis on market-directed incentive and restraint mechanism. The second innovation is the empirical analysis on the efficiency of market-directed incentive and restraint mechamsm of Chinese listed companies. The third innovation is unifying the market for corporate control and stock option by market-directed incentive and restraint mechanism, putting forward some valuable suggestions for Chinese incentive and restraint mechanism establishment.